SIP Project Report_Snigdho Sundar Kundu

General Supply Chain and Sub Distributor Management

Summer

Internship Report

AUTHORED BY:

Snigdho Sundar Kundu

Post Graduate Diploma in Management (PGDM)

batch of 2014-2016

International Management Institute Kolkata

Tenure: April - June

1 | S t u d y o n S u b D i s t r i b u t i o n a n d S u p p l y C h a i n o f P e p s i C o I n d i a

INTERNSHIP CERTIFICATE


EXECUTIVE SUMMARY

This project deals with a study on the general supply chain and thereby a focussed study on sub

distributors of PepsiCo India in the region on North Kolkata City (NKC).

The study span is a period of eight weeks. The first two weeks were spent on understanding the modus

operandi of PepsiCo’s distribution system, and the next six on studying sub distributors and their

operations.

For the first two weeks, Prerna Udyog’s Tangra Distribution Centre was the hub from where markets

such as Rajabazar and Salt Lake was studied. Also, key performance indicators (KPIs) and Focus

Month Objective (FMO) was understood, Distribution Metrics were acquainted with.

Sub Distributor is channel partner that operates in areas where direct distribution is difficult. Such

difficulty may occur due to lack control on the area or otherwise. Sub distributors are generally sole

proprietor entities that operate somewhat independently. In general they engage in distribution of not

only one product but other products too.

The project has attempted to understand the vitality of the sub distributors and their integral part in the

supply chain. It focusses on their behavioural aspect and motivation and the impact of such factors on

the way they operated as a channel partner. Thereby it tries to suggest ideas that can improve the

efficiency of the supply chain and the sub distributor.

The Managerial importance of this project is that it will give unique insights from the field which will

be a repository of ground knowledge. It can be used for future strategic decision making. Suggestions

for the same have been included in this report. The problems that have been addressed are quite

common. They may be applied to similar contexts.


ACKNOWLEDGEMENT

I am deeply indebted to Mr Dev Narayan Sarkar, Associate Director, PepsiCo India Holdings Ltd. for

selecting me as an eligible candidate for a summer internship project with PepsiCo India Holdings Ltd.

I am grateful to Mr Subeg Singh, GMHR, Varun Beverages for giving me the opportunity to

understand PepsiCo’s supply chain mechanism and thereby assigning me a project on ‘sub distribution’

of PepsiCo in North Kolkata City.

I must admit the guidance of Dr. Nandita Mishra, Placement Chair, IMI Kolkata who supported my

decision to join PepsiCo.

My heartfelt gratitude goes towards Dr. Himadri Roy Chowdhury, my faculty guide for his constant

support and helping me to discover pathways to improve my project and make it a success.

My deep respect towards Mr. Pranab Chatterjee, TDM, Varun Beverages for welcoming me as a

summer intern in his team and allowing me to work with him.

My gratitude towards the CEs Ravi Katial, Abhishek and Rakesh Goswami, and all the PSRs who

explained me the nuances of the supply chain and subtle aspects of the beverage supply chain.

Lastly, I am also grateful to my fellow summer intern Piyush Pagaria with whom I could discuss my

ideas on improving efficiency in the supply chain processes of PepsiCo.

SNIGDHO SUNDAR KUNDU

PGDM 2014-16, IMI Kolkata


PAGE OF CONTENTS

SL. No. CHAPTER NAME MODULES PAGE NO.

Module 1: Industry Analysis

Module 2: Competition Analysis

Module 3: Bottling Franchises

Module 1: Products

Module 2: Channel Partners

Module 1: Eight Step Call Process

Module 2: Beat Planning

Module 3: Delivery Planning

Module 4: Focus Month Objectives

Module 5: Traditional Trade Performance Metrics

Module 6: Inventory Management

Module 7: Minimum Base Quantity (MBQ)

Module 1: VISI Coolers

Module 2: Planogram

Module 3: Below the Line Marketing (BTL)

Module 1: General Charecteristics of Sub Distributors

Module 2: Sub Distributor Details

Module 3: Identifying Long Term Sustainability

Module 4: Actions Suggested

6 CONCLUSION 42-44

7 LIMITATIONS 45

8 REFERENCES 46

30-33SERVICE AND MERCHANDISING4

SUB DISTRIBUTION5 34-41

OVERVIEW OF THE SUPPLY CHAIN2

INTRODUCTION1 5-13

14-16

3 OPERATIONS 17-29


ABSTRACT

Distribution is one of the major targets of any business. Distribution ensures steady growth and

maintaining existing market share. An efficient supply chain is the facilitator of effective distribution.

PepsiCo India’s supply chain typically consists of four entities, the bottler, the Carrying and

Forwarding Agent (CNF), the distributor and the retailer. However in order to penetrate in suburban

markets, where distribution through the above mechanism is difficult due to various reasons, a fourth

entity called “Sub Distributors” come into play. The ‘sub distributor’ is an intermediary in between

the distributor and the retailer in selected geographies. This project deals with understanding the

behavioural aspects of sub distributors and its effect on the modus operandi of sub distributors. Based

on the study the project suggests ideas that can lead to stronger channel relationships and an efficient

supply chain. The project borrows ideas from the general distribution system of PepsiCo as well as its

competitors. The project appreciates the existing mechanism and suggest ideas that can make the

supply chain more efficient. To accomplish this various existing literature on Supply Chain

Management was referred to and supply chain of other FMCG companies were also studied. It

recommends that visibility is the key to efficiency of supply chains for products such as soft drinks

that involve reverse logistics.


INTRODUCTION

Soft Drinks is one of the popular FMCG products and also one of the most complex ones to distribute.

Soft drinks is manufactured in various ways. Bottling plants import concentrates which are introduced

into plants where bottling take place. Bottled soft drinks are then transported to distribution centres in

bulk. Distribution Centres are smaller companies that apply for distribution licenses to the soft drink

company. The distribution centres are business partners that work in tandem with bottlers. They

provide the infrastructure, manpower and local knowledge to the mother company. Especially in

countries like India local knowledge is of immense importance because the country is so divergent.

There are territories that are unplanned and only a local person can identify such territories. Also trust

and a good relation is extremely important in the Indian business context. If one can win the trust of a

partner he can do good long term business with him. Beverages are manufactured in a large number of

brands and also a large number of Stock Keeping Units (SKUs). This expedites the complexity of

distribution in the form of tracking demand of each SKU and inventory management of SKUs as well

as the brands. The major market of the beverage sector being unorganized retail makes it all the more

difficult to capture data and facilitate data driven decisions. There is also an existence of ‘bullwhip

effect’ in the supply chain. This is because decisions are mostly heuristics based. Thus orders are

placed according to ballpark estimates. Similar decision making upwards the supply chain results in

‘bullwhip effect’. Visibility is the panacea to reduce the bullwhip effect. However unorganized retail

is still not so advanced to facilitate visibility of the point of sale (POS) data to the channel partners.

Thus it becomes extremely difficult to forecast demand. Soft drinks demand is also affected by a lot

of other factors such as climatic conditions, festivals, offers etc. This again adds to the existing

complexity. Reverse logistics forms an integral part of the beverage supply chain. Keeping track of

reverse logistics also plays a major part of the supply chain. This causes many retailers to not stock

beverages. The proliferation of brands and SKUs under the beverages umbrella makes inventory

management and forecasting very difficult. On top of that there are wholesale schemes that increases

variability of demand. Constant addition and deletion of retailers also adds to the variability. Some

companies such as RC Cola, new to the Indian Market have intelligently avoided the problem of

reverse logistics by removing the presence of returnable glass bottles (RGBs) in their SKUs.


MODULE-1: INDUSTRY ANALYSIS

The Indians are the third largest consumers of beverages in the world, after US and China. However

the per capita consumption of beverages in India has been quite low. This got India into the focus areas

of beverage majors. Since then penetration has increased and competition has become fiercer. The

market is undoubtedly dominated by PepsiCo and the Coca Cola Company. Other major players

include Parle Agro, RC Cola, Campa Cola, Dabur India, Del Monte Foods etc.

Jointly, PepsiCo and the Coca Cola Company hold about 95% of the Indian beverage market1.

Business today: ‘A rough summer’, July 21, 2013

With gradual change in the lifestyle of Indian households and a fast increase in disposable incomes the

soft drinks market has experienced growth in the Indian market. Rise in rural consumption leading to

intelligent pricing and SKU planning, beverage majors such as Pepsi, Coca Cola and Parle Agro have

started rural penetration. Emergence of the health conscious consumer in the Indian landscape has

created high demand for juice based drinks and bottled water. Bottled water market has grown

tremendously in India with numerous local players fighting for market share and the leaders trying to

register their brands in the Indian consumers’ mind.

The focus of most beverage companies right now is rural penetration and ways to increase per capita

beverage consumption. Beverage marketers are thus doing extensive research on factors that drive

beverage consumption and are trying to come up with product variants that would appeal to the taste

of the modern Indian consumer. India is thus attracting investment from new entrants such as RC Cola.

1 NIIR Project Consultancy Services: Soft Drinks Industry in India, www.niir.org

Pepsi 9.80%

7up 7.50%

Mountain Dew 5.80%

Slice 3.40%

Mirinda 7.60%

Coke 8.30%

Sprite 15.00%

Limca 7.00%

Fanta 8.30%

Thums Up 14.80%

Maaza 3.30%

PEPSI BRANDS

COCA COLA BRANDS


Beverage drinking pattern in India is quite sporadic due to factors such as climate, lack of brand

awareness, prevalence of home-made drinks such as lemon water etc. Many Indians prefer not to

consume soft drinks due to health reasons. This is why soft drinks majors such as Coca Cola Company

and Pepsi have migrated to products like Juices, Bottled Water, Foods, etc.

Some reasons of sporadic beverage consumption in India as opposed to economies such as US or China

can be cited as such2:

Indians do not like the taste of packaged beverages, they prefer making their own beverage at

home

Beverages are not available according to their preferred flavours

Energy drinks often do not suit the Indian taste and are quite expensive for the average Indian

consumer

Notwithstanding, India is the third largest consumer of beverages in the world. Approximately around

120 billion litres of non-alcoholic beverage is consumed by Indians every year3. Only 5% of that is

packaged store bought beverage. Major beverage consumption is contributed by tea and coffee. Thus

Soft drink companies fight out only a 6 billion litre of beverage consumption. Projections suggest that

2 Boston Analytics Study on over 7900 Indians published in Asia Food Journal 3 “Soft drink industry in India”, NIIR Project consultancy Services

Excerpt from Boston Analytics’ survey on over 7900 Indians published in Asia Food Journal

It has been observed that

most Indians consume

beverages less than once as

day.

About 75% Indians consume

less than one store bought

beverage a Day.


the soft drink industry will grow at the rate of 19% per annum annually.4 Hence in the recent years

India has experienced fresh investments in the soft drink and beverage business.

The graph shows a steady growth over the years 2000 through 2010. The absolute change in sales of soft drinks

have been captured by the next graph. It shows a mixed trend. It can be understood that the rate of growth of

sales has diminished initially and became constant. It again increased in 2006 and diminished again in 2007 and

remained constant in 2009 and 2010.

These years were marked by good foreign investment, increase in per capita income which might be reasons of

such steady growth. However recession struck India in 2008-09. Overall the market of soft drinks has done quite

well to constantly grow at a Compounded annual growth rate (CAGR) of 5.87%.

4 Drink Technology India report on the Indian Food and Beverage Industry, 2013

243262

279 291310

330359

373388

403

0

50

100

150

200

250

300

350

400

450

Mill

ion

Cas

es

Years

DEMAND OF AERATED SOFT DRINKS

2000-01

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

19 1712

19 20

29

14 15 15

0

10

20

30

40

Mill

ion

Cas

es

Years

G ROWTH IN SALES OF SOFT DRINKS (ABSOLUTE CHANGE)

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

Mean Sales 323.80

Standard Deviation 55.49

Coefficient of Variation 17.14%

The coefficient of variation is 17.14%.

It may be commented that growth has

been steady and there has not been

any negative growth as shown by the

graph.

Soft Drink Industry in India, NIIR Project Consultancy Services

Soft Drink Industry in India, NIIR Project Consultancy Services

Soft Drinks started their

penetration into rural India in

order to keep their growth

steady.


Soft Drink consumption (in million litres) have been captured by the following chart. The CAGR of

soft drink consumption has been found to be 21.89% from 2008 to 2013. With such high growth rate

the soft drink industry in India seems prosperous. Consumption in 2018 has been projected.

The next chart compares soft drinks consumption pattern with that of bottled water, aerated drinks and

juices.

4369

11755

22937

0

5000

10000

15000

20000

25000

2008 2013 2018 projected

Mill

ion

Lit

res

Years

S O F T D R I N K S C O N S U M P T I O N PAT T E R N

43692734

1207 381 47

11755

8197

23511132 75

22937

16957

3465 2413102

0

5000

10000

15000

20000

25000

Soft Drinks Bottled Water Aerated Drinks Juices Others

Mill

ion

litr

es

C O N S U M P T I O N PAT T E R N O F N O N A L C O H O L I C D R I N K S

2008

2013

2018 projected

High growth of soft drink

consumption can be

attributed mostly to the

changing life style of

Indians, exposition to media

and a good distribution.

Euromonitor International 2014, VDMA Report

Euromonitor International 2014, VDMA Report

Soft Drinks 21.89%

Bottled Water 24.56%

Aerated Drinks 14.26%

Juices 24.33%

Others 9.80%

CAGR 2008-2013Juices have been projected to achieve the highest growth rate from

2013 through 2018. Players like ITC have also jumped into the

bandwagon with its own brand of juices B Natural. Followed by

juices bottled water will also grow fast. However growth of

carbonated drinks are expected to decline gradually due to the rise

of health conscious Indians.


MODULE-2: COMPETITION ANALYSIS

The soft drink Industry in India is mostly dominated by two players; the Coca Cola Company and

PepsiCo. Jointly they have captured around 91% of the total soft drinks market in India. Some other

notable competitors are Parle, Dabur India, Del Monte Foods etc.

Coca Cola

Both Coca Cola and PepsiCo operate through franchises in India. Coca Cola operates in India through

its Indian Subsidiary Hindustan Cola Holdings. Coca Cola owns 51% stake in this company making it

a wholly owned subsidiary of Coca Cola. It operates through 16 franchises and 35 plants5. Coca Cola

has built a strong market by acquiring dominant Indian brands from companies like Parle, Cadbury.

Some of the notable brands that have been acquired by Coca Cola in India are:

Thums Up (formerly owned by Parle)

Limca (formerly owned by Parle)

Citra (formerly owned by Parle)

Gold Spot (formerly owned by Parle)

Maaza (formerly owned by Parle)

Rimjim (formerly owned by Parle)

Scweppes (formerly owned by Cadbury)

These acquisitions gave Coca Cola a head start and it just acquired the 60% market share that Parle

had been enjoying through its brands. Since then Coca Cola has arguably been leading the soft drinks

market in India. The sales ratio of soft drinks to beverages for Coca Cola is about 95:5. Coca Cola

targets to bring this ratio to 80:20.

5 “Soft drink industry in India”, NIIR Project consultancy Services

5 95

0% 20% 40% 60% 80% 100%

1

2

C O C A C O L A : S O F T D R I N K S T O O T H E R B E V E R A G E S

Other Bevarages Soft Drinks


Coca Cola has ventured into products like canned coffee and iced tea through its brand Georgia.

However it has not ventured into food unlike Pepsi. About 30% of the brands owned by Coca Cola

have come through acquisition. Thus mergers and acquisitions have played a critical part in the strategy

of Coca Cola in India.

Coca Cola’s brands in India have been listed below:

Coca Cola

Diet Coke

Coke Zero

Thums Up

Sprite

Fanta

Limca

Maaza

Milky Maaza Delight

Minute Made: Pulpy Orange

Minute Made Nimbu Fresh

Minute Made Guava

Minute Made Mango

Minute Made Mixed Fruit

Burn

Kinley Water

Kinley Soda

Schweppes

Georgia Gold

Apart from these the Coca Cola Company has many other brands through joint ventures. One such

brand is Nestea, a joint venture between Nestle and the Coca Cola Company. Nestea is a brand that is

available in most countries. In India it is available in four flavours: Lemon, Peach, Apple and

Cardamom.


PepsiCo

Pepsi entered India through a marketing tie up with Hindustan Lever Limited. Thus, it advantaged the

experience of Hindustan Lever Limited’s deep routed network in India. Partnerships has been the key

of Pepsi’s business success in India. It has acquired only two brands in India, one being Uncle Chips.

PepsiCo operates in India through its marketing subsidiary PepsiCo India Holdings Private Limited.

Pepsi has total 36 plants is India. 13 of which are company owned and 23 are owned by franchises6.

Pepsi has always believed that giving more independence to the franchise partners and allowing them

to expand operations would result in garnering the local knowledge and supply chain economics. Its

largest bottling partner is Varun Beverages, the flagship company of RJ Corp.

Unlike Coca Cola, PepsiCo’s product portfolio is quite balanced through the presence of both

beverages and food items. Some of the Notable Brands that PepsiCo owns are:

Foods:

Cheetos

Kurkure

Lays

Lehar namkeen

Quacker Oats

Uncle Chips

Beverages:

7up

Aquafina

Duke’s

Gatorade

Mirinda

Mountain Dew

Nimbooz

Pepsi

Slice

Tropicana

6 Indian Beverage association website


MODULE-3: BOTTLING FRANCHISES

Franchises play a major role in the India operations of both the companies. Most of the operations from

production to sales is over seen by the bottlers. The mother company oversees mostly the marketing

of its products. There is competition among the franchises too; even franchises of the same company.

85% of soft drinks are still sold in returnable glass bottles (RGB)7. The floating stock of bottles in the

Indian market have been valued at ₹6 billion. In order to abide by the guidelines and to introduce new

bottles a fresh investment of ₹5 billion is required. However after the government allowed such

investment to be deferred, the soft drink companies used PET bottles extensively.

Franchises are provided with the cola concentrates by the mother brand. They often procure raw

materials such as mango pulp, oranges, bottles, bottle caps and packaging materials from local Medium

and Small Scale Enterprises.

The franchises own trucks and other infrastructure to facilitate sales and distribution. They employ

manpower and invest in the back end infrastructure requirements for beverage distribution.

7 “Soft Drink Industry in India”: NIIR Project Consultancy Services

34.00%

15.00%9.00%

7.00%

7.00%

6.00%

5.00%

6.00%

11.00%

MARKET SHARE OF FRANCHISES

Aradhana Beverages

Varun Beverages

Devyani Beverages

Kandhari Beverages

Ludhiana Beverages

Sri Sarvarya Beverages

Pearl Drinks

Pearl Beverages

Others

Aradhana Beverages

hold 34% of the market

share at the Number 1

position.

Varun Beverages is at

number 2 with 15%

market share.

NIIR Project Consultancy Services, “Soft Drink Industry in India”


OVERVIEW OF THE SUPPLY CHAIN

MODULE-1: PRODUCTS

The brands that have been majorly covered here include:

Pepsi

Mirinda

7up

Mountain Dew

Slice

Nimbooz

Acquafina

Lehar Soda

These products come in various SKUs making the task of inventory management very complex.

Products are classified as under:

LIGHT REFRESHING BEVERAGE

Bottled Soft Drinks (BSD)

Aquafina (AF)

Juice Based

Drinks (JBD)

Carbonated Soft

Drinks (CSD)

Returnable

Glass Pallets

(RGP)

Polyethylene

Terephthalate

(PET)


The SKUs and the Brands have been mapped with each other.

SKU

Tetra pack Can 200ml 300ml 350ml 500ml 600ml 1200ml 1250ml 2000ml BRAND

PEPSI ✓ ✓ ✓ ✓ ✓ ✓

DIET PEPSI ✓ ✓ ✓

PEPSI ATOM ✓ ✓

MIRINDA ✓ ✓ ✓ ✓ ✓ ✓

7UP ✓ ✓ ✓ ✓ ✓ ✓

MOUNTAIN DEW ✓ ✓ ✓

SLICE ✓ ✓ ✓ ✓ ✓

TROPICANA SLICE

ALPHONSO ✓

ACQUAFINA ✓ ✓

NIMBOOZ ✓ ✓

NIMBOOZ MASALA

SODA ✓

LEHAR SODA ✓

As it can be observed from the above chart, the channel of distribution has to handle a large array

of products and SKUs. Moreover, new products or SKUs are added on as and when required,

depending on seasonality, experimentation or other factors.

Metrics regarding the Product-SKU mix of the distribution channel has be explained in the

forthcoming section.


Considering only the beverages sold through the traditional distribution chain product mix

dimensions have been listed below:

Product Mix Width: 12

Product Mix Length: 37

Average Product Mix Length =Product Mix Length

Product Mix Width=

37

12= 3.083

New entrants to the product family of Pepsi’s beverages are ‘7up Nimbooz Masala Soda’ and

‘Tropicana Slice Alphonso’.

Tropicana Slice Alphonso is a premium brand that Pepsi was previously selling only through the online

channel. Only recently the product was launched into the traditional retail stores through the

distribution chain that carries Pepsi’s classic beverages. This product has fared well in some markets

but not all. The reason being its premium nature and a price point of ₹50 which many consumers are

not ready to pay. Moreover consumers are confused between the normal slice of ₹35 and Tropicana

Slice Alphonso.

7up Nimbooz Masala Soda is another new entrant endorsed by Anushka Sharma. It has done well only

in some pockets. Often consumers confused this product thinking it to be a new sort of Soda8.

MODULE-2: CHANNEL PARTNERS

Pepsi operates through a 4 tier supply chain involving the following channel partners:

1. Plant

2. Carrying and Forwarding Agent (CNF)

3. Distributor

4. Retailer

However, in order to penetrate into suburban areas Pepsi has partnered with smaller distributors and

termed them “sub-distributors”. Sub distributors are small business entities, generally sole

proprietorships with low capital, small space and low infrastructure. They know their small markets

very well. In these markets business happen only on the basis of good relationship and trust. Thus their

integration into the supply chain is vital in order to capture deeper suburban markets.

8 As per comments received from retailers on store visits


OPERATIONS

In generic terms there is primarily three types of operations that any channel partner takes care of:

1. Primary: Goods Received

2. Secondary: Goods Dispatched

3. Reverse Logistics: cash, returnable glass bottles, damaged stock and application forms

Primary for a distributor is handled by him by monitoring stocks. Secondary is executed through a

process called “Order booking Go to Market”. The first step of order booking is an eight step call.

MODULE-1: EIGHT STEP CALL PROCESS

The 8 step call process is the sales pitch of PSRs at every retail outlet. It include the following steps:

A salesman is the contact point between

the company and the retailer. He ought

to be respected and listened to.

A PSR punching orders in his handheld

device.

1 PREPARATION

2 GREET THE CUSTOMER

3 STORE CHECK Identify Opportunities

Determine Priorities

Evaluate the best initiative to sell

4 MERCHANDISING

Replenish Coolers, Racks and Displays

Rotate All product and Clean Equipment

Place Point of Purchase displays

Remove non Pepsi products from Equipment

5 DETERMINE THE ORDER

6 PRESENTATION

P Present the opportunities and the situation

E Explain the solution

P Provide the details

S Secure the sale

I Implement Next Steps

7 CURBSIDE DE BRIEF

8 ADMINISTRATION


Apart from the PSRs there is another category of employees who engage in pre-sales. They are called

Route Agents. Route agents are van drivers who carry stock with them and sell it to whichever retailer

demands the stock.

The PSRs engage in pre-sales and enters the order of each retailer into SAMNA in the handheld device.

The handheld device displays the available stock in the distribution centre basis which the PSR either

accepts or does not accept orders. Continuous ordering by the PSRs updates the current stock position

in SAMNA. Thus there is a very strong visibility component existing in the supply chain.

The ready stock guy hands out hand written bills to his customers. Later he puts the order into SAMNA

and takes back the remaining stock which is then taken back in the warehouse and updated.

The order data that is entered into SAMNA by PSRs is used to generate ‘Pick-Lists’. The deliveries

take place the next business day from the date of order booking. Pick Lists are used to load trucks and

goods are thus despatched for deliveries. Each truck is staffed with a driver, two loaders and a delivery

agent (DA).

The delivery agent delivers the order of each retailer, collects cash, previously delivered damaged

goods and the empty bottles and brings them back to the distribution centre. Damaged goods are

collected in between the first and the tenth day of every month.

A sample of the “Work with sheet” mentioning the 8 step call process.


MODULE-2: BEAT PLANNING

The routes of the PSRs are carefully planned. Routes comprise outlets allotted to particular PSRs. The

process of preparing a plan for PSRs to make visits to a given number of outlets efficiently is termed

‘Beat Planning’. This also gives rise to a “permanent journey plan” (PJP) of the PSR.

There are steps that are undertaken for generating a beat plan. The common steps are:

1. Classification of Outlets based on sales volume

2. Estimating sales of each outlet

3. Determining number of visits each week

Outlets are classified into Categories A, B and C.

Category of Outlet

Yearly Sales (in cartons)

Number of visits (weekly)

A ≥600 6

B 300-599 2

C ≤300 1

The volume of yearly sales is determined

through historical data.

Frequency of visits is a standard measure. It

may not be strictly followed. Some outlets

may be visited thrice a week.

One PSR must not visit less than 35-40

outlets each day.

Data from the distribution centre:

Number of Outlets 1800

Number of PSRs 14

A category Outlets 400

B Category outlets 600

C category outlets 800

Calculated from above data:

A category outlets per PSR 29

B Categoty Outlets per PSR 43

C Category Outlets per PSR 57


Now the A, B and C category outlets are labelled as A1, A2, A3…A29; B1, B2, B3… B43 and C1,

C2, C3… C57 respectively. Thus a weekly journey plan is created as such:

Beat planning gives a strict journey plan based on the given facts. However it is not a strict measure

as often some C category outlets need not be visited once every week. PSRs visit them once in two

weeks. Some B category outlets need to be visited thrice a week. Thus based on the specifics of each

route the journey plan may be tweaked by the PSR in consultation with his manager.

Calculated from above data:

29

14

10

52

Category A

Category B

Category C

TOTAL

Number of Outlets to visit per day:

MONDAY TUESDAY WEDNESDAY THURSDAY FRIDAY SATURDAY

A1 A18 B7 A1 A18 B21 A1 A18 B35 A1 A18 B6 A1 A18 B20 A1 A18 B34








A9 A26 C1 A9 A26 C11 A9 A26 C21 A9 A26 C31 A9 A26 C41 A9 A26 B42

A10 A27 C2 A10 A27 C12 A10 A27 C22 A10 A27 C32 A10 A27 C42 A10 A27 B43

A11 A28 C3 A11 A28 C13 A11 A28 C23 A11 A28 C33 A11 A28 C43 A11 A28 C51

A12 A29 C4 A12 A29 C14 A12 A29 C24 A12 A29 C34 A12 A29 C44 A12 A29 C52

A13 B1 C5 A13 B15 C15 A13 B29 C25 A13 B43 C35 A13 B14 C45 A13 B28 C53





B6 C10 B20 C20 B34 C30 B5 C40 B19 C50 B33

TOTAL VISITS 53

TOTAL VISITS 53

TOTAL VISITS 53

TOTAL VISITS 53

TOTAL VISITS 53

TOTAL VISITS 52

Weekly Journey Plan of a PSR


MODULE-3: DELIVERY PLANNING

After the PSRs have booked orders deliveries are scheduled the next day. Thus there is a lead time of

one business day. Deliveries are undertaken through small trucks with a capacity of about 200 cartons

of stock. There is one big truck in the Tangra Distribution Centre which has a capacity of 400 cartons.

The details of the available number of trucks are given below:

It is thus observed that routes of 5 PSRs are facing shortage of vehicles. So some of the 9 trucks are to

carry orders received by multiple PSRs. This problem is solved as such:

The delivery agents loads the trucks referring to the pick list summary. It gives each product’s details

and the number of cartons and number of bottles to be loaded are mentioned against each product item.

The loose column indicates goods distributed as free items with bulk purchases.

8

1

9

14

5

Total number of Small trucks of Capacity 200 cartons

Total number of Large Trucks of Capacity 400 cartons

Total Number of Trucks Available

Total Number of Routes (one route per PSR)

Number of Routes for which vericles are unavailable

PSR Truck

PSR1 Small Truck1

PSR2 Small Truck2

PSR3 Small Truck3

PSR4 Small Truck4

PSR5 Small Truck5

PSR6

PSR7

PSR8

PSR9

PSR10

PSR11

PSR12

PSR13

PSR14

Large Truck 1

Small Truck8

Small Truck7

Small Truck6

Small Trucks 6, 7 and 8 are to carry orders of two PSRs each.

The Large Truck1 is to carry the orders of 3 PSRs.

The choice of which PSRs to club together into one truck

depends on the proximity of their markets.

In case the PSRs have taken orders which outnumber the

capacity of trucks, then more than one trip is undertaken to

deliver orders or delivery is delayed.

This is why local knowledge becomes so important in this case

and as such no standard delivery procedure can be followed.

Specifics of each locality needs to be taken into consideration.


For each and every retailer a summary bill is generated which are handed over to the delivery agent.

The delivery agent unloads stock at every retail outlet referring to the bill. The retailer has to give back

the same number of empty RGPs as the number ordered. The empty pallets are loaded onto the truck

and taken back to the Distribution centre to be sent back to the factory for refilling. At the distribution

centre the empty pallets are sorted properly and are made ready for despatching to the factory. When

the primary order from the factory arrives the empty bottles are loaded onto the primary vehicle after

unloading.

Sl No.Product

Code

CARTON LOOSE

1 1009 10 12

2 1044 11 11

3 1252 15 5

4 1551 10 0

5 1642 14 14

6 2575 11 11

7 2459 11 0

8 2110 10 10

9 3591 7 7

10 3456 13 13

11 4010 20 1

12 4012 18 5

13 4173 18 0

14 4532 16 60

15 4714 25 0

16 4912 23 23

17 4111 5 15

18 5212 8 0

19 5861 9 1

20 6858 12 12

21 7181 5 0

22 7791 14 4

23 7823 17 7

TOTAL 302 211

7up 2000ml PET 9 Rs. 80

PEPSI COLA 2000ml PET 9 Rs. 80

Quantity

PICK LIST SUMMARY

Nimbooz Masala Soda 600ml PET 24 Rs. 35

Pepsi COLA 1250ml PET 12 Rs. 55

7up 1250ml PET 12 Rs. 55

Slice Mango 1200ml PET 12 Rs. 62

Mirinda Orange 2000ml PET 9 Rs. 80

7up 600ml PET 24 Rs.35

Mirinda Orange 600ml PET 24 Rs. 35

Mountain Dew 600ml PET 24 Rs 30


Everess Soda 600ml PET 24 Rs. 18

Product details

Mountain Dew 200ml RGP 24 Rs. 10

Slice Mango 200ml RGP 24 Rs.12

Mirinda Organge RGP 24 Rs. 12

7up 200ml RGP 24 Rs. 12

Pepsi COLA 200ml RGP 24 Rs.12

7up 300ml RGP 24 Rs. 15

Pepsi COLA 300ml RGP 24 Rs.12

Everess Soda 300ml RGP 24 Rs.15


7up Nimbooz 350ml PET 24 Rs. 20

Pepsi COLA 600ml PET 24 Rs. 35


The following photo shows a loader loading a truck with stocks as per pick list.

The photo is taken at the shipping yard of the Tangra Distribution Centre in North Kolkata City.

Another photo showing the sorting of empty bottles

Secondary Sales being Loaded into trucks

Empty Bottle Sorting Yard


MODULE-4: FOCUS MONTH OBJECTIVES

Each month is allotted a set of objectives that need to be fulfilled. In general a month is broken into 5

phases.

Numeric distribution is put more emphasis on by PepsiCo. Numeric distribution is vital for market

share by volume. However weighted distribution is more important to capture market share by value.

In North Kolkata City Pepsi has a higher numeric distribution than Coke.

The Focus Month Objectives are generally twofold:

1. A specific Brand

2. A specific SKU or Pack

For Example, for the month of April the Focus Month Objectives were:

1. Brand Mountain Dew

2. Pack 600ml

This is formulated in order to provide focussed attention to specific brands and specific SKUs in a

specific timeline so that at the end of the year all brands and SKUs could be successfully distributed.

It is generally done nationally.

In case of the above example for brand Mountain Dew, in the month of April there was a contest among

all the PSRs in Kolkata city in which the PSR who would sell the most number of Mountain Dew

bottles would receive a handsome reward at the end of the month.

In case of SKUs, in order to focus on a specific SKU, for example 600ml in this case, retailers would

be offered attractive schemes. For Example, for the month of April on the 600ml SKU the schemes

offered to the retailer was such:

60% distribution

collect last month's damages

by 15th of Month 85% distribution

Focus on non performing visi outlets

Focus on FMO Brand

Focus on FMO Pack

by 25th of Month Reconcile Targets and Actuals

after 25th of Month

Take necessary action on objectives not

achieved

after 10th of month

by 10th of MonthFMO is a very important technique

in handling Tradtional Trade


However Pepsi’s Brand Aquafina does not receive enough attention. PSRs sales targets do not include

Aquafina. Thus its distribution has been suffering drastically. Its competitors Kinley and Bisleri are

doing very well in spite of being offering lesser margins to retailers.

The market of packaged water is also being raided by many local companies. Their penetration strategy

is to offer margins much higher than the premium brands like Kinley, Bisleri and Aquafina. The local

brands have also penetrated rural markets better than the premium brands.

The FMO technique is a great way to tackle a long range of brands and the SKU proliferation that has

been exhibited by PepsiCo. FMO ensures:

Focussed attention to each brand and SKU

Distribution of all brands and SKUs

Accommodates focus on new launches and older brands simultaneously

Eases out targets throughout the year

Effectively manoeuvres the entire portfolio of products

In case of a new product that is launched retailers are given special schemes to display that product in

their stores. Recently Pepsi launched Tropicana Slice Alphonso in their ‘Traditional Trade’ Supply

Chain and retailers were given a spot discount of ₹400 on display of 12 bottles of Tropicana Slice

Alphonso and 12 bottles of 7up Masala Nimbooz Soda. This was not one of the FMOs in the month in

which Tropicana Slice Alphonso was launched however its launch was effectively accommodated by

the Traditional Trade supply chain.

FMO alongside numeric distribution ensures the effective distribution of the entire product portfolio

of Pepsi.

Numer of cartons

purchased

Number of Bonus

bottles per carton

1 carton 1

2 cartons 2

3 or more cartons 3


MODULE-5: TRADITIONAL TRADE PERFORMANCE METRICS

PepsiCo uses intelligent metrics to keep track of its performance in Traditional Trade. Every

distribution centre office has a Territory Scoreboard in which each PSR has to write their daily

performance metrics. The performance metrics are also generated by SAMNA and is also VISIble on

the handheld device of the PSR. These metrics are used to track performance of each PSR and thereby

each territory.

The metrics that are used to track performance are defined as such:

1. Scheduled Calls: Scheduled calls refers to the number of outlets that the PSR is expected to

visit on a particular day

2. Completed Calls: Completed calls refers to the number of outlets that the PSR has actually

visited on that particular day

3. Bill Cut: Bill Cut refers to the number of outlets that have actually placed orders on the given

day

4. Strike Rate: Strike rate refers to the percentage of Outlets in a route that have ordered on a

particular day. It is mathematically expressed as:

𝐵𝑖𝑙𝑙 𝐶𝑢𝑡

𝑆𝑐ℎ𝑒𝑑𝑢𝑙𝑒𝑑 𝐶𝑎𝑙𝑙𝑠 (%)

5. TLSD: TLSD is an acronym for Total Lines Sold per Day. It refers to the sum of the number

of brands ordered by all the outlets on any given day. For example if a route has only two

outlets A and B, outlet A orders two brands and outlet B orders 4 brands then TLSD of the

route is six. It may be noted here that the brands ordered by A and B may be common, hence

there is a double counting.

6. LPSC: LPSC stands for lines per sales call. It is here that the double counting effect of TLSD

is neutralized. It is basically a ratio between TLSD and Bill Cut. It gives an average estimate

of the number of lines sold per outlet. It is mathematically expressed as:

𝑇𝐿𝑆𝐷

𝐵𝑖𝑙𝑙 𝐶𝑢𝑡

7. Route Run: Route Run refers to the number of routes in which activity has taken place on a

given day. Route run is thus basically the number of PSRs who are present on a given day and

have been given attendance.


Given below is a sample of how the above metrics look like:

It can be inferred from the above data that Strike Rate is nothing but a measure of numeric distribution

in a given route. LPSC shows how well the entire product portfolio is getting distributed in the market.

It may be noted that the list of outlets that are there in the handheld device carried by the PSR often

contain errors such as:

Names Outlets that have closed down

Repetition of a single outlet multiple number of times

Names of outlets that used to deal in beverages but have discarded beverages from their

offerings

This often result in metrics that do not reflect the true picture of performance. This is an error of Market

Research for which Pepsi depends on Nielsen. Because the market research is outsourced there is no

scope for Pepsi to rectify these errors. Hence these errors remain in the system and continue to reflect

erroneous metrics. Though it seems a trivial issue but it may lead to wrong decision making if such a

decision is specifically taken by observing this data.

MODULE-6: INVENTORY MANAGEMENT

Inventory Management is a very complex task in case Pepsi’s beverages product line. As exhibited

earlier, there are 37 different Stock Keeping units (SKUs). Tracking the inventory level of each SKU

is a very complex job. Though Pepsi indulges in a considerable amount of automation in their

distribution centres inventory management and reordering is still largely heuristics based. Distribution

centres operate computers where all incoming and outgoing stock is taken and data is updated in real

time. Point of Sales (POS) data is captured through the hand held devices used by the PSRs and thus

the system is always kept updated.

Excerpt from the territory scoreboard

Scheduled Calls 50

Completed Calls 45

Bill cut 40

Strike Rate 80.00%

TLSD 10

LPSC 0.25

Routes Run 12

Metrics are like streetlights on a dark

road. They are always referred to for

continous improvement


Reordering is done after checking the levels of inventory of every SKU in the Distribution Centre.

Reordering of SKUs is a factor of:

1. Production at the Plant, i.e. Availability

2. Schemes that are being run at that point of time

3. Current Inventory Level

4. Backorders

5. Targets

6. Seasonality

Seasonality calculation is based on last 2 years’ monthly average sales. For 2015-2016, the seasonality

that is being followed is shown in the table:

This high degree of fluctuation in demand predominantly because of rainfall and other climatic

conditions makes it very difficult to forecast demand and plan inventory accordingly. It also makes it

difficult for the retailers who are selling the product directly to customers. A heavy rainfall just causes

a massive slump in demand and their inventory piles up too, as a result sales drop and PSRs become

unhappy.

Such a huge fluctuation in demand sometimes causes over capacity sometimes causes under capacity.

On a high temperature day existing trucks become insufficient to deliver goods whereas on a day

marked by heavy rains, demand is so low that the orders are not enough to utilize the trucks fully and

there is spare capacity. Thus sum trucks have to be kept idle.

MONTH SEASONALITY PERCENTAGE

January 2%

February 4%

March 10%

April 13%

May 15%

June 11%

July 7%

August 7%

September 10%

October 12%

November 3%

December 6%

Fluctuation in demand is very common in case of soft drinks.

Indian climatic conditions are peculiar. During this project

one day there was a very high demand and there was high

back order due to which the distributor ordered a large lot to

the factory. The day the stock arrived was stuck by heavy

rainfall and demand took a nose dive. Hence inventory

accumulation took place in the distribution centre. And

prolonged rain caused slow inventory turnover.

This phenomenon is quite often found in this industry. Often

the retailers receive stock which are very near to their expiry

dates.


MODULE-7: MINIMUM BASE QUANTITY (MBQ)

There is a Minimum Base Quantity (MBQ) for each SKU that has to be maintained at the Distribution

Centres. Minimum Base Quantity is the minimum level of stock that a distribution facility plans to

carry for a given period of time. MBQ calculation is based on past data. In the case of the distribution

centres in Pepsi, each distribution centre must carry a calculated level of MBQ. MBQ is usually a lot

size of the weekly9 average sale of the last month adjusted to this month’s seasonality. A mathematical

formula has been derived for MBQ and it is represented as such:

𝑀𝐵𝑄 (𝑤𝑒𝑒𝑘𝑙𝑦) = (𝐿𝑎𝑠𝑡 𝑀𝑜𝑛𝑡ℎ′𝑠 𝑆𝑎𝑙𝑒𝑠

𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑤𝑒𝑒𝑘𝑠 𝑖𝑛 𝑡ℎ𝑒 𝑚𝑜𝑛𝑡ℎ ) × (

𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑀𝑜𝑛𝑡ℎ′𝑠 𝑆𝑒𝑎𝑠𝑜𝑛𝑎𝑙𝑖𝑡𝑦

𝐿𝑎𝑠𝑡 𝑀𝑜𝑛𝑡ℎ′𝑠 𝑆𝑒𝑎𝑠𝑜𝑛𝑎𝑙𝑖𝑡𝑦)

It is obvious that MBQ is different for each SKU and for each distribution centre. The concept has

been made clearer through an example

Let us consider MBQ calculation for 200ml Mountain Dew in the month of July.

Seasonality for July= 7%.

Sales of Mountain dew in June= 63,000 cartons

Seasonality for June= 11%.

Number of Weeks in June= 4

𝑇ℎ𝑢𝑠, 𝑀𝐵𝑄 𝑓𝑜𝑟 𝑎 𝑤𝑒𝑒𝑘 𝑖𝑛 𝐽𝑢𝑙𝑦 = (63,000

4 ) × (

7%

11%) = 10,022 𝑐𝑎𝑟𝑡𝑜𝑛𝑠

However this is to be done for each SKU and the MBQ for each SKU is to be maintained. This makes

matters complex. It becomes more complex when an item has been out of stock for a long time and

suddenly stock for that item is to be ordered. Point in case is Slice Tetra pack 200ml and Aquafina 2

litres. In such a case last year’s data in the same period comes handy. Last year’s data is termed YAGO,

which stands for year ago.

9 A week may be assumed as 5 days of 6 days.

The distribution centres store the stock by piling up which

often makes the earlier stocks go to the bottom of the pile.

And thus they often cannot follow the FIFO method of

inventory issue. This leads to the problem of retailers

receiving expired stock and thus the company’s brand equity

is hurt.


SERVICE AND MERCHANDISING

The business of soft drinks is highly dependent on the capacity of the retailer to keep the products

chilled. Both Pepsi and Coca Cola provide retailers with VISI Coolers. The coolers come in different

sizes and its availability in the outlet is extremely important to boost sales.

MODULE-1: VISI COOLERS

To extend the support of VISI coolers, outlets are rated on various parameters which are both

quantitative and qualitative in nature. Qualitative parameters especially emphasizes on the locality.

There are some specific localities in which some outlets have political influences or the retailers are

too strong as a lobby. Examples of such kind of areas include Duttabad in Salt Lake, Rajabazar etc.

Some retailers have a tendency to abuse the VISI Coolers. Eateries and Sweet shops especially obtain

a VISI cooler and then use it to stock their own stocks other than products of Pepsi. If they are

politically strong they enter into conflict with the PSRs when the PSR tries to make their VISI Coolers

Pure. It is not always possible for the PSR to engage in a faceoff with the retailer and make his VISI

cooler pure, hence some VISI coolers are always abused by some retailers.

It has also been noted that retailers are not educated on how to use the coolers, both from the technical

point of view or from the merchandising point of view. Due to mishandling of VISI coolers the coolers

often get tampered. Pepsi has a mechanism to address the faltering coolers but retailers are quite

unaware about it. There is a toll free number on which a complaint can be registered. However it is

reported by the retailers that the person responsible for fixing the damaged VISI coolers often do not

turn up on time.

Competitor Coca Cola is quite well placed in this front. Their speed of delivering a VISI,

merchandising it and servicing it is more efficient than that of Pepsi’s. In this project about 160 outlets

have been visited and of them 120 outlets have been documented to have either Pepsi’s VISI or Coca

Cola’s VISI. Comparison has been made on the following parameters:

1. Time that was taken by the companies to get their VISI coolers delivered

2. Purity of the Cooler, purity meaning a Pepsi Cooler should contain nothing but Pepsi’s products

3. Presence of either Coca Cola’s VISI or Pepsi’s VISI

The following charts give us an understanding of how the two competitors Pepsi and Coca Cola

compete on delivering services to the retailers:


1

0.25

0 0.2 0.4 0.6 0.8 1 1.2

Months

AV E R A G E T I M E TA K E N TO D E L I V E R V I S I C O O L E R S

COCA COLA PEPSI

48%

65%

0% 10% 20% 30% 40% 50% 60% 70%

Percentage of Purity

PURITY OF VIS I

COCA COLA PEPSI

It has been observed that

Coca Cola takes 1/4th of

the average time that

Pepsi takes to deliver a

VISI Cooler to a retail

outlet

Coca Cola has been able

to maintain 65% of their

VISI coolers pure as

opposed to 48% for the

same as Pepsi.

61%

82%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Percentage of Outlets

PRESENCE OF VIS I COOLERS

COCA COLA PEPSI

Coca Cola’s VISIs are

present in 82% of the

outlets, whereas 61% of

the outlets house Pepsi

VISIs.


MODULE-2: PLANOGRAM

Retailers are provided with a Planogram to merchandise the VISI Coolers. Often it is done by the

PSRs also. A planogram is a merchandising tool. It is a diagram that envisages a specific way to place

retail products in shelves. It is done so that customers have the same experience of purchasing in

different retail stores.

A sample of the Planogram that is used to merchandise VISI Coolers is shown below:

VISIBILITY OF THE RANGE, INCREASES SALES

Consumer Sees the Entire range and Picks up the required SKU which increases your sales

EASE OF ORDER BOOKING

If an SKU is less in stock or Out of Stock, it is clearly visible through the cooler and reordering becomes easier

WHATEVER SELLS MORE IS STOCKED MORE

Space provided to fast moving SKUs is more resulting in fewer stock out situations. More sales will translate into more revenues and profits

SAVES TIME AND ELECTRICITY

Since products are clearly visible to the retailer in the VISI cooler it takes lesser time to find and pick up the desired products for the consumer. It saves electricity cost as also cooler is not kept open for a long time

MORE STOCK IN VISI COOLER

Charging cooler according to the planogram results in more stocks in the VISI cooler shelves

PLANOGRAM (POG) AND ITS BENEFITS

The Planogram and its benefits have been listed out very well by Pepsi however it remains highly

ineffective. This is because most retailers do not use English as a language very much. On top of

that the benefits of POG often is not communicated to the retailer. The picture given above has

been pasted at the stock point and is visible only to the PSRs. If the same can be communicated to

the retailers effectively, and the benefits of using the POG can be explained, they will embrace it.


MODULE-3: BELOW THE LINE MARKETING

Below the line marketing is practiced heavily in case of Traditional Trade. These majorly constitute

Point of Purchase (POP) Displays. Recently the Indian Premier League was sponsored by Pepsi.

During the IPL season Pepsi introduced a scheme of giving a free ticket for a match in Eden Gardens

to a retailer on ordering a specified lot size. This became a popular scheme and boosted the sales

volume.

POP Displays for Pepsi IPL has been shown as under:

The problems that exists in such kind of marketing drives are:

Timing

Effectiveness

The BTL marketing drive for ‘Crash the Pepsi IPL’ was done only before the semi-finals. This could

have been done earlier to ensure its visibility to people for a long period of time.

It is also to be noted that in this case a “gate” (as shown in the picture) was installed in front of the

retail outlet. This was done at a time when monsoons were arriving in West Bengal. The installation

of the gates were so fragile that most of them were damaged the very next day due to heavy rainfall

and storm. Thus the campaign was futile and the goal of the campaign was not achieved.


SUB DISTRIBUTION

Sub Distribution is an additional tier in the existing traditional supply chain of PepsiCo. Sub

distributors are few in number and are present in areas which are difficult to penetrate through

traditional trade. Such difficulties may be due to absence of proper roads, low demand, unprofitable to

deliver at every shop etc.

Sub Distributors are important agents for last mile deliveries of products in suburban pockets within

metro cities which are not profitable enough to be distributed through direct distribution. Sub

Distributors are located to the close vicinity of inaccessible markets and procure stock from the

distribution centres. They are generally sole proprietorship enterprises with fewer resources. Often sub

distribution is not the only activity they indulge in. PepsiCo has a total of 12 sub distributors in North

Kolkata City:

Of these sub distributors only the first six has been included in this study. This study on sub distribution

attempts to identify the behaviour of the sub-distributors as:

1. Opportunistic

2. Entrepreneurial

3. Indifferent

Sl. No.

SUB Distributor Name Area

1 Tara Maa Enterprises Salt Lake Nayapatti

2 Annapurna Agency Sealdah

3 Munna Stores Sealdah

4 Guha and Roy Enterprises Salt Lake Sector 1

5 Saraswati Enterprises Salt Lake Kadapara

6 Sunita Enterprises Salt Lake Kadapara

7 Abdulla Cold Drinks Rajarhat Lauhati

8 Ashiq Enterprises Technopolis

9 Kakuli Enterprises Rajarhat Lauhati

10 Kailash Chauhan Sonagachi

11 Sanjoy Yadav Sonagachi

12 New Kalika Supplier Belgachia


MODULE-1: GENERAL CHARACHTERISTICS OF SUB DISTRIBUTORS

Some general characteristics that ware found common in all the sub distributors that have been studied

are:

1. Own low resources such as capital, manpower, storage space, vehicles etc.

2. Cater to small markets (30-40 outlets at max)

3. Flexible and can work at any point of time in the day

4. Indulge in more than one activity/businesses for livelihood

5. Have a good rapport with the retailers they deal with

6. Extending credit

7. Generally don’t try to expand their market once a certain level of sales is attained

8. Want independence and prefer not to conform to guidelines unless incentives are extended

9. Often do not maintain proper records

10. Stock product of competitors also

The most important part of operating through sub distributors is the reach that is obtained into the deep

sub urban pockets where direct distribution by super distributors become difficult.

MODULE-2: SUB DISTRIBUTORS’ DETAILS

In this study 6 sub distributors have been considered for analysis. These sub distributors operate in

North Kolkata City. Some of the sub distributors are “Fat Dealers” or Wholesalers. Information

regarding these sub distributors and their operations have been collected by visiting their premises,

travelling with them during their secondary sales and interacting with them. Their details have been

given in the table. The fields that have been looked at for each sub distributor are:

1. Area of Operation

2. Available Warehouse space

3. Warehouse space utilized (for Pepsi)

4. Number of Staff Employed

5. Type and Number of Vehicles Used

6. Vehicle Capacity

7. Number of Outlets Operated

8. Businesses Run

9. Brands Dealt in


Table: Sub Distributor Details

MODULE-3: IDENTIFYING THE LONG TERM SUSTAINABILITY OF THE SUB DISTRIBUTORS

One of the major goals of this project was to identify which sub distributors could be sustainable in

the long term and thus be relied upon for expanding distribution. Once such sub distributors are

identified those sub distributors could be invested on by providing more man power, knowledge etc.

Once the behavioural nature of the sub distributors are identified PepsiCo can plan what actions to take

on which sub distributor. This judgement would incorporate a plethora of both quantitative and

qualitative factors. To enumerate the probable long term sustainability of the sub distributors a two

dimensional graph is constructed with Loyalty on one axis and Efficiency of Operations on the other.

The graph would look as such:

SUB Distributor

Name

Tara Maa

Enterprises

Annapurna

Agency

Munna

Stores

Guha and

Roy

Enterprises

Saraswati

Enterprises

Sunita

Enterprises

Area of OperationNayapatti, Salt

Lake

Sealdah Station

BazarBowbazar

Saltlake,

Duttabad

Kadapara,

HyattKadapara, Hyatt

Warehouse Space

Available (sq. ft.)300 1200 500 500 350 200

Warehouse Space

Utilized (sq. ft.)200 200 400 500 200 100

Space Utilization

(%)66.67% 16.67% 80.00% 100.00% 57.14% 50.00%

Inventory Holding

Capacity (cartons)500 8000 2000 2000 500 400

No. of Staff 1 + self 5 2 + self 3 self + 2 children self + 2 children

Vehicles Used 3 wheel Van (1)Cycles (3)

Rikshaw (1)Cycles (2) Tata Ace Van (1) Cycles (2) Cycles (2)

Vehicle Capacity

(cartons)100

5 (cycles)

20 (rikshaw)5 200 5 5

No. of Outlets

Operated35-40 15-20 20-25 25-30 10-15 10-15

Beverage

Distribution

Beverage

Distribution

Beverage

Distribution

Beverage

Distribution

Fruits

DistributionRetail Store

Beverage

DistributionRetail Store

Packaged Milk

Distribution

Retail Store Retail Store

Pepsi Pepsi Pepsi Pepsi Pepsi Pepsi

RC Cola Amrit Fresh Coca Cola Coca Cola Coca Cola

Bisleri RC Cola

Local Packaged

Water

Businesses Run Beverage

Distribution

Brands Dealt in

Wholeseller of

Cigarettes,

Biscuits etc.


METHODOLOGY:

The methodology that has been adopted in order to ascertain the long term sustainability of sub

distributors is similar to the factor rating method. For understanding the long term sustainability of a

sub distributor the two most important parameters that PepsiCo’s sales heads should focus on are:

1. The sub distributor’s efficiency of operations

2. The sub distributor’s loyalty towards the firm

A plethora of variables that could establish these two umbrella parameters of “Efficiency of

Operations” and “Loyalty” have been identified, weighted and quantified.

The variables that constitute each umbrella parameter have been laid down as under:

Efficiency of Operations (Y Axis):

o Outlets Serviced

o Vehicles Employed

o People Employed

o Space Utilization

o Total Time of Operation per day

o Meeting Payment Deadlines

o Relationship and Rapport with Retailers

o Efforts on Merchandising

o Efforts on Market Growth

Ef

fici

en

cy o

f O

pe

rati

on

s

Loyalty

OPPORTUNIST

TRUE ENTREPRENEUR

NEEDS TRAINING

INDIFFERENT

LOW HIGH

LOW

H

IGH


o Experience of Doing Business

Loyalty (X Axis)

o Proper Record Keeping

o Purity

o Business focus

o Providing accurate Schemes to Retailers

o Efforts to push new products and slow moving items

o Restricting operations to allotted territory

o Suggesting new ideas to the company

DEFINITIONS:

Efficiency of Operations: Efficiency of Operations is construed as whether a sub distributor’s actions

are efficient or not

Loyalty: Loyalty is construed as whether a sub distributors is conforming to the company’s guidelines,

following procedures and looking forward to be with the company in the long term.

The variables have been also been defined as:

a. Outlets Serviced: Ratio of Number of Outlets serviced to Number of Outlets present

b. Vehicles Employed: Ratio of Capacity of the vehicle employed to that of super distributor’s

vehicle capacity

c. People Employed: Ratio of People Employed to what the super distributor would have done

d. Space utilization: Ratio of Utilized space for Pepsi to available space

e. Total Operation Time per day: Ratio of Hours Operated to that of a super distributor’s hours

of operation

f. Meeting Payment Deadlines: Ratio of Deadlines met on Time to Deadlines Due

g. Relationship and rapport with retailers: How much influential he is on his customers

h. Efforts on Merchandising: Time given to merchandising as a percentage of operating time

i. Efforts on market growth: New outlets opened as a percentage of new outlets opened by super

distributor

j. Experience of Doing Business: Years as a percentage of the most experienced sub distributor

k. Proper Record Keeping: How well records have been maintained

l. Purity: PepsiCo’s products in volume as a percentage of total products held

m. Business focus: Ratio of 1 to number of businesses operated

n. Providing Accurate schemes to retailers: Extent to which schemes are not concealed

o. Efforts to push new and slow moving items: Number of times mentioned to customers


p. Restricting operations allotted to territory: Extent of indulgence in channel poaching

q. Suggesting new ideas to the company: coming up with constructive solutions to problems

The basis of quantification of these parameters are any one of the four bases mentioned as under:

i. Comparison with the super distributor’s modus operandi (CSMO)

ii. Comparing with the best performing sub distributor’s metrics (CBPSM)

iii. Simple ratio (RATO)

iv. Qualitative ratings (QUALR)

The aforementioned bases of quantification have been chosen in order to arrive at normalized scores.

Thereafter these generalized scores have been weighted. Weighted has been given to each variable

according to the importance of the actions of the sub distributor.

The following table sums up the methodology of quantifying the variables and thereby making them

applicable to each sub distributor.

As is evident, each variable attracts a maximum score of 100. Thereby the weighted score is arrived at

by multiplying the normalized score obtained with the weight assigned to each variable.

Variables Basis of Rating Weightage

Maximum

Normalized

Score

-Outlet Coverage in the area RATO 5% 100.00

-Van/vehicle capacity CSMO 5% 100.00

-Deployment of People CSMO 5% 100.00

-Space Util ization RATO 7% 100.00

-Total Time of Operation per day CSMO 10% 100.00

-Meeting Payment Deadlines RATO 15% 100.00

-Relationship and Rapport with retailers QUALR 10% 100.00

-Efforts on Merchandising QUALR 20% 100.00

-Efforts on Market growth QUALR 20% 100.00

-Experience of Doing Business CBPSM 3% 100.00

-Proper Record Keeping QUALR 15% 100.00

-Purity RATO 25% 100.00

-Business Focus RATO 25% 100.00

-Providing accurate schemes to retailers QUALR 15% 100.00

-Efforts to push new products and slow moving items QUALR 10% 100.00

-Restricting operations to alloted territory QUALR 7% 100.00

-Suggesting new ideas to the company QUALR 3% 100.00

EFFICIENCY OF OPERATIONS

LOYALTY


After the quantitative analysis each sub-distributor can be classified according to the model that has

been developed above as any of the following four categories:

1. Indifferent

2. Needs Training

3. Opportunist

4. True Entrepreneur

In order to enumerate this a bubble chart has been used. The size of the bubble indicates the maximum

of both good operational efficiency and good loyalty. Thus, the sub distributor who scores the highest

on both the two parameters summed up receives the biggest bubble size.

1

2

3

4 5 6

HIG

H

LOW

LOW

HIGH

Effi

cie

ncy

of

Op

era

tio

ns

Loyalty

COLOUR CODING:

1 Guha and Roy Enterprises

2 Tara Maa Enterprises

3 Munna Stores

4 Saraswati Enterprises

5 Annapurna Agency

6 Sunita Enterprises

OPPORTUNIST TRUE ENTREPRENEUR

INDIFFERENT NEEDS TRAINING

It is thus evident from the graph that two out of the six sub

distributors are true entrepreneurs and is likely to deliver

sustainable benefits in the long run. Three out of the six are

indifferent to all actions taken by the company, however one of

the six demonstrates opportunistic behaviour.


MODULE-4 ACTIONS SUGGESTED

After the nature and the behaviour of each sub distributor have been identified there has to be actions

to be taken towards each of them and such actions should bring maximum benefits to benefit

PepsiCo.

It is worthwhile to reiterate here that in the deep sub urban pockets sub distributors have been an

effective model to register distribution. Thus it is of importance to treat the sub distributors as important

entities and recognize them as an integral part of the supply chain.

Observed Sub Distributor Behaviour

Actions that can be taken

INDIFFERENT Do not invest any time or money any further

Restrict operations to pushing more products only

NEEDS TRAINING

Educate

Provide knowhow to improve efficiency

Provide and explain guidelines to operate

OPPORTUNIST

Identify Motivating Factors

See if such motivating factors can fulfil long term goals

Find out what can ensure loyalty

TRUE ENTREPRENEUR

Invest time and keep them motivated

Provide necessary wherewithal in the form of people, credit, merchandise etc.

Explain the long term benefits of actions such as merchandising

Suggest Ideas that will help him grow his market

Forge a strong partnership that will pay off in the long run


CONCLUSION

The project undertaken on general supply chain and sub distribution has completed an extensive study

of the processes and strategies that are used for ensuring seamless distribution and thereafter it has

studied a focussed part of the supply chain, which is sub distributors and their behavioural aspects of

business.

The project has hereby attempted to comment on the impact of each process on the supply chain

efficiency and motivate on of the retailers and sub distributors. A table has been created in the next

page that demonstrates the impact of any process or observation and it has been mapped with the

efficiency of the competitor’s operations.

Matched upto 25% or less

Matched Upto 50% or less

matched upto 75% or less

Matched Upto 100% or less

Matched by more than 100%

Sustained Positive Impact

Fairly Significant Impact

Negative Impact

Impact

INDEX

Competitor's Satus

The Index on the right hand side shows

how the processes and observations have

been mapped to that of the competitors

and how it is evaluated as providing a

sustained positive impact, Fairly

significant impact or providing a

negative impact.

The table in the next page at a glance can

show where PepsiCo needs to focus on

and where improvements are vital.

This is a product of first-hand experience

and field study and thus can prove to be

extremely important for decision

making.


SL. NO.PROCESS/

OBSERVATIONDETAILS

COMPETITORS'

STATUSIMPACT

1 Large Portfolio of ProductsPepsiCo has an evenly distributed product portfolio pertaining to Food and

Beverages. Thus a slump in sales of one can be compensated by the other

2 Better Margin To RetailersPepsiCo's margins have in general been higher than that of its competitors. Thus

many retailers choose to become exclusive dealers of PepsiCo.

3Order Booking Go To Market

(OBGTM)

Enables maintaining a good relationship with the retailers through regular

personal visits and optimized trucking of Products.

4Sales Automated Management

for the New Age (ERP)

Enabled capturing the PSR's point of sale (POS) data and thereby effective

demand forecasting.

5 Brand Equity A strong brand of PepsiCo's products helps in opening up new outlets easily.

6Market Research through

Nielsen

Nielsen provides PepsiCo with Market Intelligence and the service of VISI audit.

This helps in targetting new outlets for expansion and assessing retailers'

performance towards merchandising respectively.

7 Merchandising Support

PepsiCo is lagging behind its competitiors on Merchandising. The Lead time

deliver a VISI to a retailer is four times that of Coca Cola. Also, Coca Cola has

much more POS displays than PepsiCo.

8Recovery of Damages and

Expiries

Coca Cola and RC Cola are both much more agile than PepsiCo in recovering

damaged and expired stock from the retailers

9 Acquafina

Pepsi's Brand Acquafina is clubbed along with its beverage supply chain

however it does not receive adequete attention from the sales force. PSRs are not

given any targets for Acquafina separately. Acquafina has been constantly losing

market to competitors.

10 Distributor's Operations

Distributors often face capacity constraints. Their resources in the form of

vans, people and cash are limited. Thus often deliveries are delayed to a great

extent which agitates the retailers. In order to mitigate this distributor's often

engage the PSRs to deliver stocks to retailers. This stops the PSR from his

normal operations and thus sales are hampered.

11 Stock Keeping

PepsiCo has to institutionalize guidelines for the Distributors pertaining to

storing stocks. A common problem that was observed was that on stacking of

cartons, cartons carrying a nearer expiry date were, often unconsiously, kept at

the bottom of the pile and in effect they either got expired in the warehouse

itself, or expired stock or stocks with very close expiry dates was delivered to

the retailers wich ignited agitation.

12Communication of Schemes by

sub distributors

Concealing Schemes offered by the company was observed as a common

practice of the Sub Distributors. In order to mititgate this a database of the

retailers in the sub distributors can be built and daily schemes can be

communicated to them vis SMSs

13 Stock Outs

Stock Outs were observed to be very frequent at the Distribution centres. This

happened because schemes were tweaked without any prior notice to the

Distributors. Therefore, the distributor could not plan his inventories

accordingly. So, most of the stocks of a particular item had to be given as

schemes instead of regular orders. This again agitated the retailers.

14 VISI Purity

Coca Cola has always gone the extra mile to keep their VISIs pure. More often

than not Pepsi's VISIs have been found to be impure, that is, it has contained

products of competing brands or other items such as milk or butter


15 VISI Perormance

It has also been observed that Coca Cola's VISI Coolers have performed much

better than that of Pepsi's in terms of cooling and sturdiness. Pepsi may need to

ensure that their VISIs perform up to the mark.

16 National/ Regional Tie Ups

Coca Cola has put more emphasis on National and Regional Tie Up outlets. In

Kolkata Pepsi has a tie up with Monginis, on the other hand, Coca Cola has a tie

up with Sugar and Spice, Kathleen and Cakes. PepsiCo will have to rethink its tie

up strategies in order to boost sales through these confectionaries and fast food

chains

17 New SKUs

Coca Cola has been early movers in launching new SKUs at attractive price

points. For example, it has a 150 ml Maaza pouch priced at Rs. 5 and a 750ml

coke and Thums Up priced at Rs. 40. PepsiCo will also need to come up with

such innovations to counter competition from the competitor's intelligently

planned SKUs


LIMITATIONS OF THE PROJECT

Though this project was done diligently with a lot of importance to intricate details. Some limitations

persists in this project. Few of the limitations of this project are:

1. Less Time Span: The Project’s time span was just 8 weeks. Given more time, a much more

comprehensive report could be prepared

2. Small Sample Size: In case of Sub distributor profiling, the sample size of sub distributors

taken was only six out of the 12 sub distributors that operate in north Kolkata city. Thus the

evaluations that have been focussed on mostly pertain to these six distributors. Though the idea

may be extrapolated to a lot of other evaluations some distinct features may come up from

some sub distributor which the model might not be able to capture

3. Reluctant Responses: While interviewing sub distributors, retailers and PSRs some of them

have shown reluctance to respond to queries. In such cases the project has resorted to

observations of someone else’s take on the matter

4. Unavailability of Company’s Viewpoints: The project lacks viewpoints of the strategic level

management of the company as not a lot of interaction occurred with the strategic level

managers since the project was based mostly in the field

5. Lack of Geographic Coverage: The project is concentrated only in North Kolkata City that

too in selected areas of B.T. Road, Kadapara, Salt Lake, Tangra, Rajabazar, Esplanade, Sealdah

and Bowbazar. Hence the observations derived are from these selected locations and thus the

project lacks geographical coverage

6. Lack of Data: At many points the lack of availability of data has been felt. For example, sub

distributors often keep no records of their operations, hence, some data were hypothesized


REFERENCES

1. Sales and Distribution Management, Oxford Publications, Panda and Sahadev, Edition II

2. Operations and Supply Chain Management, McGraw Hill Publishers, Chase Shankar and

Jacobs, Edition XIV

3. Marketing Management, Pearson, Kotler Kelly Koshy Jha, Edition XVI

4. “Soft Drink Industry in India”: NIIR Project Consultancy Services

5. Euromonitor International 2014, VDMA Report

6. Boston Analytics Study on over 7900 Indians published in Asia Food Journal

7. Business today: ‘A rough summer’, July 21, 2013

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