RTM Manual Draft

7/31/2019 RTM Manual Draft

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RTM Manual Version_Draft

Hindustan Coca Cola Beverages Pvt. Ltd.@copyright2007 Page 1 of 153 Strictly confidential; For internal use only

TABLE OF CONTENTS

Part 1: Introduction to RTM -------------------------------------------------------------------------4

Chapter 1: RTM Definition, Scope, and Deliverables------------------------------------- 5Introduction------------------------------------------------------------------------------------------------------------------------- 5

1.1.1 RTM Definition ------------------------------------------------------------------------------------------------------------- 51.1.2 RTM Scope ------------------------------------------------------------------------------------------------------------------ 61.1.3 RTM Deliverables---------------------------------------------------------------------------------------------------------- 7

Part 2: RTM Models, Diagnostics and roadmap ----------------------------------------------8

Chapter 2.1: RTM Models--------------------------------------------------------------------------9Introduction------------------------------------------------------------------------------------------------------------------------- 92.1.1 Types of Distribution Models ----------------------------------------------------------------------------------------- 9

How Each Model Works: Diagrammatic Representation ------------------------------------------------------------------------------------------ 10

2.1.2 Direct Distribution Models: On Basis of Order Taking ----------------------------------------------------- 10DSD Ready Stock Model ---------------------------------------------------------------------------------------------------------------------------------- 10DSD - Pre-sell Model --------------------------------------------------------------------------------------------------------------------------------------- 11DSD - Tel-sell Model---------------------------------------------------------------------------------------------------------------------------------------- 12

Responsibility Matrix ---------------------------------------------------------------------------------------------------------------------------------------- 122.1.3 Direct Distribution Models: On Basis of Management Control------------------------------------------ 13Company Managed ----------------------------------------------------------------------------------------------------------------------------------------- 13Clearing & Forwarding Agent (C&FA) Managed----------------------------------------------------------------------------------------------------- 13

2.1.4 Direct Distribution Models: On Basis of Delivery Mechanism------------------------------------------- 13Feeder Truck Model----------------------------------------------------------------------------------------------------------------------------------------- 13Bulk Break Model (Direct) --------------------------------------------------------------------------------------------------------------------------------- 14

2.1.5 Advantages and Limitations of Direct Distribution Models----------------------------------------------- 142.1.6 Indirect Distribution Models: On Basis of Size and Type ------------------------------------------------- 15

Anchor Distributor Model ---------------------------------------------------------------------------------------------------------------------------------- 15Distributor Model--------------------------------------------------------------------------------------------------------------------------------------------- 16

Area Marketing Contractor (AMC) Model-------------------------------------------------------------------------------------------------------------- 17

2.1.7 Indirect Distribution: Delivery Mechanism --------------------------------------------------------------------- 19Full Load from Warehouse/Plant ------------------------------------------------------------------------------------------------------------------------ 19

Milk Run-------------------------------------------------------------------------------------------------------------------------------------------------------- 19

Chapter 2.2: RTM Diagnostics: Selecting an RTM Model------------------------------ 20Introduction----------------------------------------------------------------------------------------------------------------------- 202.2.1 Market Classification--------------------------------------------------------------------------------------------------- 202.2.2 RTM Diagnostics -------------------------------------------------------------------------------------------------------- 21

Distribution Effectiveness Index-------------------------------------------------------------------------------------------------------------------------- 21Distributor Strength Index --------------------------------------------------------------------------------------------------------------------------------- 26Distributor Strength vs. Distribution Effectiveness -------------------------------------------------------------------------------------------------- 27Distributor ROI------------------------------------------------------------------------------------------------------------------------------------------------ 27

2.2.3 Choosing an RTM Model---------------------------------------------------------------------------------------------- 28

Chapter 2.3: Two-year RTM Roadmap ------------------------------------------------------ 29

Introduction----------------------------------------------------------------------------------------------------------------------- 292.3.1 RTM Planning (Town and Distributor-wise)-------------------------------------------------------------------- 292.3.2 RTM Roadmap: Integration into Annual Business Plan (ABP) ------------------------------------------ 34

Part 3: RTM Infrastructure Design and Management ------------------------------------- 36

Chapter 3.1: DSD Operation -------------------------------------------------------------------- 37Introduction----------------------------------------------------------------------------------------------------------------------- 373.1.1 DSD Route Designing Process------------------------------------------------------------------------------------- 37

Get Data-------------------------------------------------------------------------------------------------------------------------------------------------------- 38Locate Outlets on Map ------------------------------------------------------------------------------------------------------------------------------------- 39


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Create Zones ------------------------------------------------------------------------------------------------------------------------------------------------- 40Calculate No. of Vehicles and Vehicle Capacity ----------------------------------------------------------------------------------------------------- 40Trade Channel Characteristics Determine Distribution Requirements ---------------------------------------------------------------------- 44Create Routes ------------------------------------------------------------------------------------------------------------------------------------------------ 46

3.1.2 Warehouse Management --------------------------------------------------------------------------------------------- 50Warehouse Location ---------------------------------------------------------------------------------------------------------------------------------------- 50Basic components of the Warehouse ------------------------------------------------------------------------------------------------------------------ 51Designing of Warehouse----------------------------------------------------------------------------------------------------------------------------------- 57Warehouse Calculations ----------------------------------------------------------------------------------------------------------------------------------- 59Cross Docking ------------------------------------------------------------------------------------------------------------------------------------------------ 66

Cost Estimate------------------------------------------------------------------------------------------------------------------------------------------------- 69Schedules------------------------------------------------------------------------------------------------------------------------------------------------------ 70Warehouse Layout and Drawings ----------------------------------------------------------------------------------------------------------------------- 71

3.1.3 Stock Management ----------------------------------------------------------------------------------------------------- 74Assessing Product Age ------------------------------------------------------------------------------------------------------------------------------------ 75Identifying and Rotating Products in Warehouse ---------------------------------------------------------------------------------------------------- 76Stacking and Storing Products --------------------------------------------------------------------------------------------------------------------------- 78Managing Product Quality --------------------------------------------------------------------------------------------------------------------------------- 82Managing Glass---------------------------------------------------------------------------------------------------------------------------------------------- 83Handling Non-conforming Products and Materials -------------------------------------------------------------------------------------------------- 84Other Good Warehousing Practices -------------------------------------------------------------------------------------------------------------------- 85

3.1.4 Fleet Management ------------------------------------------------------------------------------------------------------ 86Fleet Buying--------------------------------------------------------------------------------------------------------------------------------------------------- 86Designing Fleet Upper Structure------------------------------------------------------------------------------------------------------------------------- 91

Fleet Maintenance------------------------------------------------------------------------------------------------------------------------------------------- 93Advertising Through Fleet --------------------------------------------------------------------------------------------------------------------------------- 95Fleet Performance Metric---------------------------------------------------------------------------------------------------------------------------------- 95

3.1.5 Invoicing and Settlement Process--------------------------------------------------------------------------------- 953.1.6 Cost Per Case (CPC) Calculation and Benchmarking ------------------------------------------------------ 96

Warehouse Costs-------------------------------------------------------------------------------------------------------------------------------------------- 96Handling Costs ----------------------------------------------------------------------------------------------------------------------------------------------- 96Fleet Costs ---------------------------------------------------------------------------------------------------------------------------------------------------- 97Manpower Costs --------------------------------------------------------------------------------------------------------------------------------------------- 98Other Sales and Distribution Costs --------------------------------------------------------------------------------------------------------------------- 98

Chapter 3.2: Clearing & Forwarding Agent (CF&A) Appointment------------------ 99Introduction----------------------------------------------------------------------------------------------------------------------- 993.2.1 C&FA Appointment Process ---------------------------------------------------------------------------------------- 99

3.2.2 C&F Legal Compliance-----------------------------------------------------------------------------------------------100

Chapter 3.3: Anchor Distributor Appointment ----------------------------------------- 103Introduction----------------------------------------------------------------------------------------------------------------------1033.3.1 Anchor Distributor Appointment----------------------------------------------------------------------------------103

Chapter 3.4: Distributor Appointment and Management --------------------------- 104Introduction----------------------------------------------------------------------------------------------------------------------1043.4.1 Distributor Appointment---------------------------------------------------------------------------------------------104

When to appoint a distributor --------------------------------------------------------------------------------------------------------------------------- 104Appointment Process------------------------------------------------------------------------------------------------------------------------------------- 105

3.4.2 Key Elements of Distributor Management---------------------------------------------------------------------110Managing Godown ---------------------------------------------------------------------------------------------------------------------------------------- 110

Managing Routes and Vehicles ------------------------------------------------------------------------------------------------------------------------ 112Managing Glass/Liquid ----------------------------------------------------------------------------------------------------------------------------------- 115Maximizing Return On Investment (ROI) ------------------------------------------------------------------------------------------------------------ 118The Right Systems and Processes ------------------------------------------------------------------------------------------------------------------- 120Distributor Satisfaction Survey ------------------------------------------------------------------------------------------------------------------------- 124

3.4.3 Distributor as Market Execution Partner -----------------------------------------------------------------------124Market Execution Partner Role------------------------------------------------------------------------------------------------------------------------- 124

Chapter 3.5: Area Market Contractor (AMC) Appointment ------------------------- 127Introduction----------------------------------------------------------------------------------------------------------------------127


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3.5.1 AMC Appointment -----------------------------------------------------------------------------------------------------127

Part 4: RTM Enablers------------------------------------------------------------------------------ 128

Chapter 4.1: Systems and Processes ----------------------------------------------------- 129Introduction----------------------------------------------------------------------------------------------------------------------1294.1.1 Depot/C&FA Replenishment System----------------------------------------------------------------------------129

Replenishment Process---------------------------------------------------------------------------------------------------------------------------------- 129Performance Metrics-------------------------------------------------------------------------------------------------------------------------------------- 130Roles and Responsibility--------------------------------------------------------------------------------------------------------------------------------- 130System Requirement ------------------------------------------------------------------------------------------------------------------------------------- 130

4.1.2 Cola Replenishment System (CRS) for Distributors -------------------------------------------------------131Objective of CRS------------------------------------------------------------------------------------------------------------------------------------------- 131How does CRS Work ------------------------------------------------------------------------------------------------------------------------------------- 131CRS Roles and Responsibilities ----------------------------------------------------------------------------------------------------------------------- 132CRS Process------------------------------------------------------------------------------------------------------------------------------------------------ 132CRS Enablers----------------------------------------------------------------------------------------------------------------------------------------------- 134CRS Benefits------------------------------------------------------------------------------------------------------------------------------------------------ 134Performance Metrics-------------------------------------------------------------------------------------------------------------------------------------- 134

4.1.3 DSD Router---------------------------------------------------------------------------------------------------------------135Territory Planner ------------------------------------------------------------------------------------------------------------------------------------------- 135Dynamic Router -------------------------------------------------------------------------------------------------------------------------------------------- 136Different Ways for Using DSD Router ---------------------------------------------------------------------------------------------------------------- 136Scope and Areas DSD Router can Impact ---------------------------------------------------------------------------------------------------------- 136

Critical Success Factors --------------------------------------------------------------------------------------------------------------------------------- 137Leading Routing Solution Providers ------------------------------------------------------------------------------------------------------------------ 137Criteria for Evaluation------------------------------------------------------------------------------------------------------------------------------------- 137Implementation Steps ------------------------------------------------------------------------------------------------------------------------------------ 138

4.1.4 Distributor Automation System (DAS) --------------------------------------------------------------------------139How does DAS work -------------------------------------------------------------------------------------------------------------------------------------- 139DAS Implementation Requirements ------------------------------------------------------------------------------------------------------------------ 139DAS Benefits------------------------------------------------------------------------------------------------------------------------------------------------ 140Responsibility Matrix for DAS Implementation ----------------------------------------------------------------------------------------------------- 141Dos and Donts at Distributor Point------------------------------------------------------------------------------------------------------------------- 142DAS Performance Metrics------------------------------------------------------------------------------------------------------------------------------- 142

Chapter 4.2: RTM Organization Structure------------------------------------------------ 143Introduction----------------------------------------------------------------------------------------------------------------------143

4.2.1 National RTM Organization Structure---------------------------------------------------------------------------1434.2.2 Regional RTM Organization Structure --------------------------------------------------------------------------1434.2.3 Unit RTM Organization Structure ---------------------------------------------------------------------------------1444.2.4 RTM Job Descriptions------------------------------------------------------------------------------------------------144

Chapter 4.3: Proposed COA ------------------------------------------------------------------ 1454.3.1 Proposed COA ----------------------------------------------------------------------------------------------------------145

Part 5: RTM Performance Metrics ------------------------------------------------------------- 146

Chapter 5.1: RTM Index ------------------------------------------------------------------------ 147Introduction----------------------------------------------------------------------------------------------------------------------1475.1.1 Calculating RTM Balance Score Card---------------------------------------------------------------------------147

Quality Parameters---------------------------------------------------------------------------------------------------------------------------------------- 147Service Parameters --------------------------------------------------------------------------------------------------------------------------------------- 148Cost Parameters ------------------------------------------------------------------------------------------------------------------------------------------- 150

5.1.2 Monitoring Progress on RTM Roadmap------------------------------------------------------------------------1515.1.3 Monitoring Progress on RTM System Implementation----------------------------------------------------152

Summary--------------------------------------------------------------------------------------------- 153


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Return to Table of Contents

PART 1:INTRODUCTION TO RTM


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Chapter 1:RTM Definition, Scope, and Deliverables

Introduction

The RTM Manual is intended to standardize the entire gamut of operations under RTM function.

This chapter will cover RTM basics including:

1. What is RTM?2. What does RTM involve?3. What are the key RTM deliverables?

1.1.1 RTM Definition

RTM or Route-to-Market refers to the operations focused on ensuring that the retail outlets get the right quantity andquality of relevant SKUs from the complete range of products manufactured by the company, in a timely and cost-effective manner.

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If the entire product range does not reach the retail outlets/consumers in a timely and cost-effective manner, then itreflects ineffective RTM.

1.1.2 RTM Scope

Manufacturing RTM Outlet

Input = X

Incorrect RTM Design

Low Numeric Distribution

Low Market Control

Accounts Receivables/Cases On

Loan (COL)

Dissatisfied Channel Partners

Unplanned Discounting

Write-offs and BBD

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1.1.3 RTM Deliverables

DSD & Anchor Distributor Territories

Order Fulfillmentfor pre sell outlets:

The orders are taken by marketdevelopers/pre sell executives. Theseorders would be fulfilled by the RTMTeam.

Availability of all the relevant SKUs onready stock route (depending upon pastsales and the expected sale of theoutlets on that route)

Deciding optimal service frequencyof the outlets of the route based ondrop size, strategic importance, andinvestment abilities

For Other Distributor Territories

SKU availability as per stock norms

Ensuring right distribution infrastructure for optimalservice frequency to the outlet

Measuring and improving Distributor satisfaction scoresby optimizing distributor infrastructure & investment

Regular distributor financial health review and correctiveaction plan

Effective Distributor Appointments

Seamless closure of non viable and inefficient distributors

Distributor Coaching to manage their infrastructure.

Depot Management

Warehouse management and MIS

Managing productivity of casuallabor, forklift, glass rotation, FirstExpired First Out (FEFO), glassbreakages, etc

Stock requirement planning andnecessary coordination

Stock management , First ExpiredFirst Out (FEFO)

DSD route design and productivity

Fleet management

Statutory compliances

Clearing and Forwarding Agent(CF&A) Management

For Logistics Centre/Warehouses at Plant:

Cola replenishment through tel-sell team

Distributor order generation (Order execution is NOT RTMresponsibility)

Freight negotiation for outbound along with UCSM andFactory Manager/ Shipping Manager

Monthly and weekly sales planning

Maintenance of minimum stocks at plant and depot to becoordinated between plant and customer service

System Operations

Distributor Automation System(DAS)

Cola Replenishment System (CRS)

Routing Software

Cola Mobile


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PART 2:RTM MODELS, DIAGNOSTICS AND ROADMAP


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Chapter 2.1:RTM Models

Introduction

This chapter covers the basic RTM Models.

While the content of this chapter might seems very basic, it is intended to standardise the nomenclature ofvarious models running within the country. This chapter will clarify that some models, maybe currently knownby a different name, are just the variations of the basic models listed in this chapter.

2.1.1 Types of Distribution Models

The various distribution models are broadly categorised as follows based on the complexity of our distributionoperations.

Different Distribution Models

DIRECT DISTRIBUTIONFor a Metro

INDIRECT DISTRIBUTIONFor Power Town/Rural

On basis of ordertaking

On basis ofmanagement

controlOn basis of

delivery

mechanism

On basis of size andtype

On basis ofdeliverymechanism

Direct VanSales/Direct StoreDelivery (DSD)Ready Stock

DSD Pre-sell

DSD Tel- sell

Companymanaged

Clearing &Forwarding

Agent (C&FA)managed

Directfromdepot/plant

FeederTruck

BulkBreak

Anchordistributor

Distributor

Area MarketContractor(AMC)

Full load fromplant/depot

Milk run


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How Each Model Works: Diagrammatic Representation

* C&FA Clearing and Forwarding Agent

AMC Area Market Contractor

2.1.2 Direct Distribution Models: On Basis of Order Taking

DSD Ready Stock Model

A Direct Van Sales/DSD Ready Stock is a type of direct distribution model in which the same person sells anddelivers the product in the same visit to a customer.

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C&FA/DepotFor Far

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Customer/Retailer

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Distributor

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FeederTruck/Bulk

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AnchorDistributor

/Distributor

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&A*(De ot/Godown


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Advantages of DSD Model

The company salesman:

Improves customer retention.

Builds customer relationship.

Realizes additional sales opportunities.

Obtains first-hand information about the market.

Advantages of Pre-sell

Efficient use of trucks

Easier to introduce new brandsand packages

More sophisticated selling for keyaccounts


Company salesman directly contacts the customers store at the Point-of-Sale and sells our products.

DSD - Pre-sell Model

A pre-sell is a type of direct distribution model in which the salesman sells on one day and merchandises on anotherday. This means that the salesman would first visit the outlet, generate an order and then pass on the order todispatch for delivery.

This system is used:

To service outlets with complex buying patterns where its difficult to forecast demand.

To improve vehicles productivity.

Pre-seller Delivery Man

DeliveryMerchandisingOrder Taking


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Advantages of Tel-sell

Low-cost of order taking (up to 100customers a day per tel-seller)

Limitations of Tel-sell

No face-to-face contact withcustomers

Requires highly reliable anddeveloped phone system


DSD - Tel-sell Model

The tel-seller takes orders over telephone, and the delivery man delivers on same day or next day. Merchandising isdone along with delivery or by market developers in case they have been deployed.

Responsibility Matrix

Responsibility Matrix for Direct Distribution OperationsDirect

DistributionModel

Activities

AccountMgt.

Merchandising OrderGeneration

Dispatch Warehousing Invoicingand CashCollection

Delivery

DSD-ReadyStock

SE/MD MD/Salesman Salesman C&FADispatcher

DepotExecutive

Salesman Salesman

DSD-Pre-sell SE/MD MD MD C&FADispatcher

DepotExecutive

Salesman Driver/Loader

DSD Tel-Sell SE/MD MD TeleExecutive

C&FADispatcher

DepotExecutive

Salesman Driver/Loader

* * SE: Sales ExecutiveMD: Market DeveloperC&FA: Clearing and Forwarding Agent

Tel-sellerDelivery Man

DeliveryMerchandisingSelling

Market Developer


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2.1.3 Direct Distribution Models: On Basis of Management Control

Company Managed

The entire gamut of activities in the DSD operation is carried out directly by the company.

All the risks associated with selling and distribution of good, etc. rest with the company.

The infrastructure and fleet may be hired or owned by the company.

Clearing & Forwarding Agent (C&FA) Managed

The ownership of goods remains with the company till the time the product reaches the retail outlet (in effectthe stock in warehouse belongs to the company).

Risks associated with selling and distribution of goods, managing labor relations, etc. are shared between theClearing and Forwarding Agent (C&FA) and the company, depending on the agreement drawn up.

In most cases, day-to-day administration, especially management of labor and of filled and empty flow, is putin charge of the Clearing and Forwarding Agent (C&FA).

Risk of loss of stock/ theft is also transferred to the Clearing and Forwarding Agent (C&FA).

2.1.4 Direct Distribution Models: On Basis of Delivery Mechanism

Feeder Truck Model

This is a distribution mechanism wherein feeder trucks act as our mobile depots to service our routevehicles.

It allows us to replenish our route vehicles on the route itself in cases where:o The plant or depot is far off from the markets.o It is unviable for the route vehicles to plan a return trip to re-load stocks.

Use of such feeder trucks thereby minimizes the instances of stock outs both on the route and in routevehicles.


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Advantages of Direct Distribution

Improved customer service

Service levels to accounts are assured always, asunlike a distributor who may look at discontinuingroutes that do not offer him a healthy return, DSDroutes run with more commitment and regularity, beingfocused long-term benefits of servicing accounts.

Since DSD is managed and controlled by thecompany, third party issues (like stock outs due toinsufficient funds), do not arise, leading to better

customer service.

Strengthened partnerships and simpler accountmanagement as the company salesman is in directpersonal contact with the accounts

Increased Speed & Efficiency through:

Automation (i.e. handhelds) eliminates manual errors

Faster placement of newproducts/innovations/designs to market, as nointermediary is involved

Limitations of Direct DistributionInitial investment outlay of the companycan be high as compared to an indirectdistribution because it involves purchase offleet and certain other investments etc.

A DSD operation would normally have ahigher running costas compared toindirect distribution, especially when totalvolumes are low.

The company is directly exposed to all

external affairs and environmental risks.


Bulk Break Model (Direct)

Bulk break distribution mechanism is used to service:

o Markets with inaccessible roads where our trucks cannot goo Markets where traffic conditions make distribution using our trucks difficulto Markets where appointment of a sound distributor/AMC is not possibleo Markets having non-exclusive Area Market Contractors (AMCs) who do not co-operate with us

usually due to the discount structure, other issues, etc.

Route trucks reach in the vicinity of the above markets with stocks and salesmen. The salesmen then unloadthe stocks into trolleys and take them to the otherwise inaccessible retail outlets.

2.1.5 Advantages and Limitations of Direct Distribution Models


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Advantages of Anchor Distributor Model

Risk and responsibility of managing selling& distribution operations is transferred todistributor, as the ownership of goods lieswith the distributors.

Company can use its resources and time tofocus on its market development objectivesfor that particular geography.

Better market service and accountrelationship is assured, as the companytakes care of account management and thecosts of the anchor distributor (due to which hewill have no issues in consistently and regularlyrunning all routes as decided by the companyirrespective of the season).

Limitations of Anchor DistributorModel

Being a third party, an anchordistributor has to necessarily buystock from the company and cancause delays and operationalissues, such as not buying stock inpre-defined quantities or timeperiod, delaying payments, etc.

Higher Cost Per Case (CPC) thana normal distributor


2.1.6 Indirect Distribution Models: On Basis of Size and Type

Anchor Distributor Model

Who is anchor distributor?

As the name suggests, an anchor distributor is a big size distributor who is our mainstay in a market that is not largeenough to warrant a DSD operation but at the same time is big enough to get the benefits of a DSD operation.

How does the model work?

The business model is designed and operated exactly on the lines of a DSD operation but with lesser directrisk, as the title of goods is transferred to the anchor distributor after they get invoiced and receive the goodsfrom the company.

The payment model is combination of fixed and variable. All fixed costs are reimbursed. When volume goesup, the benefits come to the company.

The anchor distributor gets paid/reimbursed for all his operating expenses and also gets a fixed return,thereby limiting his financial risk.


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Advantages of Distributor Model

Low cost operation, as distributors are localindividuals/firms who operate out of aparticular geography. In case of distributorshaving complementary lines, the overall coststructure of the distributors becomes low, asthe operating costs get apportioned to all linesmanaged by him.

Risk and responsibility of managing selling& distribution operations is transferred todistributor, as the ownership of goods lieswith the distributors.

Company can use its resources and time tofocus on its market developmentobjectives for that particular geography.

Provides information/recommendation onexpanding the footprint of the company in aparticular geography, as the distributor knowsthe area and enjoys good local retailrelationships.

Easy entrance into new channels where thedistributors have complementary lines

Distributors can extend and track creditand Cases On Loan (COL) to the localmarket (which the company is unable to do),as they are local parties with limited businesssize and limited number of retail outlets to dealwith.

Limitations of Distributor Model

Withdrawal of low-return serviceroutes in off-peak season, affectingthe companys ability to reachconsumers in such geographies.

Distributors in some cases can alsotend to emphasize products/brand-packs that are easy to sell but may

not be in-line with companysmarketing objectives.

Being third party intermediaries,distributors can cause operationalissues in their defined territories incases where they have some financialconstraints or any other personalproblems (which could not beanticipated at the time of theirappointment).


Distributor Model

Who is a distributor?

Distributor is a third party intermediary who purchases stock from us and further redistributes to retail outlets providing

quality service to them at an optimal cost.

Such intermediaries or distributors are typically appointed in any or all of the following situations:

When reaching the customers directly is not economically viable for the company through a DSD operation

When markets are very far from sales center and have low volumes

When markets are in a very challenging external affairs environment

When market is fragmented and with low VPO

How does the model work?

Distributors are normally paid on a per cases sold basis for the services rendered by them.

The ownership of goods gets transferred to the distributors after the stock gets invoiced to and received bythem.


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Responsibility Matrix for Distributor and Anchor Distributor OperationsDirect

DistributionModel

Activities

AccountMgt.

Merchandising OrderGeneration

Dispatch Warehousing

Invoicing andCash Collection

Delivery

Distributor SE/MD Distributor

Salesman/MD

Distributor

Salesman

Distributor Distributor Distributor

SalesmanDistributor

SalesmanAnchor

DistributorSE/MD Anchor

DistributorSalesman**/

MD

AnchorDistributor

Salesman**/MD

AnchorDistributor

AnchorDistributor

AnchorDistributorSalesman

AnchorDistributorSalesman

** The Anchor Distributor salesman, though on Anchor Distributors payroll, is selected and chosen by the companyrepresentatives based on the eligibility criteria specified by the company.

Area Marketing Contractor (AMC) Model

Who is an Area Marketing Contractor (AMC)?

An Area Marketing Contractor (AMC) typically is a very small distributor who normally cannot take a full truck loadfrom the plant and hence needs to purchase stock from another distributor in smaller lots.

Area Marketing Contractors (AMCs) are generally required in the following types of markets:

Markets with low Volume per Outlet (VPO)

Markets with very high contribution of returnable glass and low case strength, which necessitates highfrequency of service

Congested areas that are inaccessible by typical distributor vehicles such as LCVs, autos, vans, etc.

High credit requirements coupled with great credit risk (both of which can only be fulfilled by a local entity)

Far-flung markets where the volume is high enough to warrant a distribution entity, but low enough to becatered directly from the plant/depot

How does Area Marketing Contractor (AMC) model work?

The AMC gets compensated on a per case basis, part of which is funded by the company and the balance bythe distributor.

Depending upon the intensity (i.e. whether he has mechanized or non-mechanized operations), AMCcompensation may vary.


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Advantages of Distributor AMC Model

Regular service assured for smallmarkets, which do not get serviced on aregular beat or warrant a full load from theplant

Local AMCs normally have good localrelationships and can extend credit in

Cases on Loan (COL) with less risk asthey are physically present in the area.

Long-term possibility to convert AMCsinto regular distributors who canreceive full truckloads from the plant, asthe AMC distributors gradually grow insize.

Limitations of Distributor AMC Model

Increased cost as one layer increases in thedistribution set up

Over-reporting of sales by distributor orsalesmen: The distributor may over-reportsales to the AMC leading to leakages. Also, ifthe AMC is part of a DSD route, there is a

possibility of over-reporting of sales by thesalesman. In extreme cases, both possibilitiescould occur simultaneously. Hence, it isimportant to have separate AMC routes andfix upper limit/capping in their volumes.

Outlet-level sales data may not available fora small set up.

Return to Table of ContentsTypes of Area Marketing Contractor (AMC) Model

1. AMC as a sub-distributor in a cityIn cities, there are certain markets with characteristics that necessitate the use of AMCs. Typically, theseareas are:

Slums

Low-cost housing areas with inaccessible roads

Old city wholesale markets where traffic conditions make distribution difficult

Certain areas which absorb a lot of credit and/or COL, which the company may not be able toextend

It is recommended that these AMCs should be directly supplied by the plant as in case of a normal distributoror as a Milk Run from the plant to prevent double handling in a city distributor godown.

2. AMC as a sub-distributor in upcountryIn rural markets, there are certain markets that have the characteristics described in the previous variation ofthe AMC model. Typically, these areas are groups of villages that are too few in number and too low involume to merit a regular outlet-wise beat plan, but high enough to merit distribution.

3. Non-exclusive AMC Operations

Such an AMC model is typically operational in large metros like Mumbai and New Delhi (at times referred toas FAT agents).

It is characterized by a market where there are only wholesale operations, i.e. a local wholesaler breaks bulkand distributes products of many beverage companies. No company-controlled operation in present in thatarea.

This type of an operation has notable drawbacks such as loss of control, excessive and competitivediscounting to stay in that market, etc.

This model is not recommended and the company should try other means like bulk break to directly coverthese markets.

Advantages and Limitations of AMC Model


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Advantages of Milk Run Model

Ensures distribution in low-volumeseasonal rural markets/ towns that do not

warrant a full truck load but are located closeto the plant

Enables the company to service C & Dclass distributors with annual volumeranges between 4,000 to 15,000 c/s.

Eliminates payment delay issues: Thedistributor presents the demand draft at thetime of receiving goods from the milk run van

Being operated by the company, Milk runensures all points are covered, unlike atransporter who is at times unable to cater tomore than 2 drop points.

Simpler vehicle planning, as orders areusually collected a day prior to the delivery

Limitations of Milk Run Model

Delays in truck turnaroundin case of communication gapbetween company anddistributors who fall on the milkrun route.

Misuse of the system bysome larger distributors fortheir own convenience whoshould ideally get full load fromthe plant.


2.1.7 Indirect Distribution: Delivery Mechanism

Full Load from Warehouse/Plant

This is the most common distribution mechanism for feeding our distributors. Distributors place a full truck-load orderon our plant or depots, and a full truck load gets dispatched.

The truck load can vary in size ranging from a payload capacity of 5.5 tons to 16 tons. The most commonly usedpayload capacity is 9 tons.

Milk Run

This distribution mechanism is usually used in upcountry markets to service small distributors or AMCs who cannotake a direct truck load from the plant/depot but still warrant service from the company and are also located relatively

close to our plant/depot.

This can also be used to service small distributors who cannot take full load from a plant in a city.

How does Milk Run work?

Milk runs involve consolidating multiple shipments to make a full truck load and dropping off small lots at multiplelocations.


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Chapter 2.2:RTM Diagnostics: Selecting an RTM Model

Introduction

In the previous chapter, we covered list of various RTM models. However, next we need to focus on:

Analyzing effectiveness of current RTM

Selecting ideal RTM model for different types of market

An ideal RTM should deliver :

Ideal service level: On-Time In-Full (OTIF) to all retail outlets measured through retail satisfaction

survey and right numeric availability Sufficient distributor ROI and net take home per month

Right CPC, calculated as a percentage of NR for the company

For each type of market and our distribution objective in that market, we need to identify the right RTMmodel which meets the above principles.

In this chapter, we cover how to:

First diagnose the current state of RTM in a market.

Then choose an RTM model for different types of market.

2.2.1 Market Classification

Market Type MPV Range

Metro A > 200

Metro B >20 < 200

Power Town > 3 < 20

Rural A Below 3

Rural B Below 1

Refer toAnnexure Kfor list of various Indian cities that fall under each market type.

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2.2.2 RTM Diagnostics

Distribution Effectiveness Index

The effectiveness of distribution in various markets is evaluated based on certain criteria. These criteria vary for

metros and power towns as depicted in the diagrams below.

Evaluation Criteria for Metros

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Swing in Market Share

% of Distributors/Routes >Break Even Volume BEV

Stability ofStructure (% New

Distributors/Routes


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Evaluation Criteria for Other Towns

Rating Each Parameter

Rating Limits For Metros

RED(0) YELLOW(1) WHITE (2)

Numeric Availability Swing > -5% In Between >=0%

Market Share Swing >-2% In Between >+2%

Volume Growth/Decline >-10% In Between >=0%

% of Distributors >Break Even Volume(BEV)

66%

Stable Distribution (% New Distributors) >33% In Between Break Even Volume BEV

Stability ofStructure (% NewDistributors/Rout

RESTDISTRIBUTOR

AREAS


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Rating Limits For Other Towns

RED(0) YELLOW(1) WHITE (2)

Volume Growth/Decline >-10% In Between >=0%

% of Distributors > Break Even Volume(BEV)

66%

Stable Distribution (% New Distributors) >33% In Between


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Using Distribution Effectiveness Model: Example

The example below uses the distribution effectiveness model for RTM diagnosis of three metro cities: City A, City B,and City C.

Rating Distribution Effectiveness in the three cities.

1. Each city is rated on distribution effectiveness parameters.

NumericSwing

VolumePerformance

MarketShare

% ofDistributorgreaterthan BEV

Stability ofStructure(New%)

Net Score Sales/MPV

City A 0 -5% 0% 33% 8% 7 10.23

City B -16 -3% 6% 0% 16% 5 7.39City C -1 -8% -9% 17% 0% 4 8.21

2. Based on the rating limits for metros, thered, yellow, and white bands are assigned to each value.

NumericSwing

VolumePerformance

MarketShare

% ofDistributorgreater thanBEV

Stability ofStructure(New%)

Net Score Sales/MPV

City A 0 -5% 0% 33% 8% 7 10.23

City B -16 -3% 6% 0% 16% 5 7.39

City C-1 -8% -9% 17% 0% 4 8.21

3. Based on the red, yellow, and white bands, Distribution Effectiveness Index is calculated.

Red = 0; Yellow = 1; White = 2

For City A

2 whites = 2 x 2 = 43 yellows = 1 x 3 = 3

Net Distribution Effectiveness Index = 4 + 4 = 7

Similarly, Distribution Effectiveness Index for City B = 5, and City C = 4.

Distribution Effectiveness Index reflects: City A market is near ideal. It needs slight correction.

Cities B and C markets need immediate corrections in the distribution.


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4. Next, market prioritization is done by plotting the Distribution Effectiveness Index on the Opportunity Matrix.

City A

City BCity C

5. Based on the diagnostic results, specific action plan is worked out.

For example, the diagnostic results and findings for City B are depicted below; based on these, theRTM plan is worked out.

Distribution Effectiveness Index

SalesOpportunityin000

250

0

500

0 5 8

Note: Sales Opportunity is calculated after benchmarking it with the average Sales/MPV index of8.6.

Town 1 -1% 0% 0% 3 Merge Distributors


Town 3 -8% 100% 0% 5 Ok.

Town 4 1% 100% 0% 6 Ok.

Town 5 -5% 100% 0% 5 Ok.


Town 7 -21% 100% 0% 4 Market Correction Required ?

Town 8 -6% 100% 0% 5 Ok.

Town 9 4% 0% 0% 4 Dist is viable at 40K.

Town 10 13% 0% 0% 4 Merge Distributors



Town 13 -13% 0% 0% 2 Scarp Hub & Spoke


Towns 3, 4, 5, and 8 areamongst the most stabledistribution.

Towns 1, 2, 6, and 10require merging ofdistributors.

Towns 7, 11, 12, 13, and

14, require immediatecorrection.


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Distributor Strength Index

This is the second level of analysis to further diagnose the source of distribution weakness or possibility of weaknessarising at a later date.

Both objectively as well as subjectively, a distributor is measured on certain parameters (listed below) to derive his

strength in a particular area.

We need to make sure that our distributor in the area is a long term and highly aligned Market Execution partner. In agiven geography, he is our key representative for the customers. If we have a strong, aligned, and satisfied partner,then we will be able to ensure highly-satisfied customers - which is our key goal.

It is difficult to measure a distributors strength/weakness on an objective basis only, as there are a lot of personaltraits like aggressiveness in market, which though can be captured through indicators like market share still may notgive a full picture. Say, there is a non-customer friendly distributor in a historically high share market area with acurrently weak competing distributor; he will give us a false sense of security in the market and as well a set ofdissatisfied customers as well.

In this section, we make an attempt to rate the strength of our distributor in a more objective and a comprehensiveway.

We measure a distributor on the following heads, each allocated different weightages, as listed below:

Level of InfrastructureInvestments vs. required

Investments(on 10-point scale)

25 %weightage

o Vehicle no. actual vs.required 5/10 Maxweightage of 5 per

parameter (excessinvestment is also notgood)

o Glass Actual vs Required 5/10

Overall Financial Strength(break-up as below)

25 %weightage

oObjective FinancialStrength (points 10) 15 %weightage

Points on Stock investmentfor 100% investment&proportionate for each%age point up to a max limit

1 point for every Rs.1/- creditper cs annual volume, up toa maximum of 4 points

oSubjective FinancialStrength (points 10) 10%weightage

A persons financialstrength/status may not getcaptured in the abovenumbers alone. Here the

Area Sales Manager (ASM) /Sales Executive (SE) canrate a person based on theirknowledge of the personsfinancial status.

Level and Strength of MarketRelationships & Level ofMarket Aggressiveness

50 %weightage

o Relationship (ObjectiveMeasure) (Points 10) 30% weightage

No of years spent as adistributor Half point for eachyear spent in KO system

2 points for 100% service level& proportionate points forlower service levels

1 point for every Rs. 2 creditper case on an annualizedvolume (upper limit for allpoints)

2 points for every 50 % REDscore

o Relationship (Subjective)(Points 10) 20%

weightage Level of marketaggressiveness and customersatisfaction based on SalesTeam rating (customersatisfaction survey in certainkey markets can also becarried out to objectify a partof this parameter).


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Note: First the objective score needs to be calculated and then the subjective score needs to be put down. This isbecause it is always better to first get an unbiased true evaluation on real time numbers. If there is too much variationbetween the objectives vs. the subjective assessment, the same needs to be explained.

Refer toAnnexure Nfor calculating the distributor strength score, as mentioned above.

The maximum distributor strength score would be 10.

To reiterate the content till now:

In the previous section, we had calculated the effectiveness of distribution through a full analysis of key businessindicators at town level.

In this section, we went to a second level of diagnosis which is the distributor level for each town that will help indrawing up a specific distributor level action plan.

Distributor Strength vs. Distribution Effectiveness

In this section, we try to plot the Distribution Strength Index versus the Distribution Effectiveness Index which will give

us a clear direction needed to be taken in the market

Distributor ROI

Target an ideal ROI of twice the bank rate (In current circumstances 18% = 2 * 9%)

Ensure a minimum ROI of 15% for each distributor.

Review the ROI half-yearly for all A class distributors and once a year for the rest.

If ROI is


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2.2.3 Choosing an RTM Model

For each of the types of markets, identify the possible models and choose the best one based on requirements.

On a broad level a very directional grid based on Volume of the Area and Market Type (as shown below) canbe used to know the possible RTM model for an area.

At a much more deeper level a grid as shown below can be used to determine the ideal model as well as the RTMdirection to take for the market.

DirectDistribution

MARKET VOLUME

Metro

Rural

HighLow

MARKETTYPE

PowerTown

AnchorDistributor

Distributor/AMC

AnchorDistributor/

Direct

Distributor/Anchor

Distributor

Distributor(Rural)+ Milk

Run

AnchorDistributor/Distributor

Distributor

Distributor(Rural)+Milk

Run

DISTRIBUTION EFFECTIVENESS Index

Metro A

Rural B

LeadLag

MARKETTYPE

PowerTown

DSD (Clearingand ForwardingA ent C&FA

DSD (C&FA)Build Operate -

Transition

Anchor DistrBuild Operate -

Transition

Distributorneeds change

Distributor(Rural) + Milk

Route

DSD (C&FA)

AnchorDistributor

Distributor

Ideally singleviable distributor

Distributor(Rural) + Milk

DSD (C&FA)

AnchorDistributor

Distributor to beretained

Distributor to beretained

Distributor AMC

Rural A

Metro B


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Chapter 2.3:Two-year RTM Roadmap

Introduction

In the above chapters, we have covered:

1. Various RTM models which are or can be in operation in an area2. Deriving ideal model matrix by evaluating market types and the distribution objective of an area based

on current level of distribution effectiveness, distributor strength, and distributor ROI.

Finally, we need to now inculcate the above diagnosis and principles into action on the ground. This chaptercovers the 2-year RTM roadmap that will help put the process in place for executing and monitoring RTMcorrection plan.

2.3.1 RTM Planning (Town and Distributor-wise)

For the ABP RTM planning:

1. The UCSM along with the sales team should chart outby Metro, Power Town, and Rural, the currentdistribution effectiveness index and distributor strengthindex.

2. The current Distributor ROI needs to be calculated for alldistributors.

3. The desired RTM model needs to be selected based onthe directional grid as well the above factors.

4. The flow from the current RTM to the desired RTMneeds to be charted on a two-year timeframe.

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rroocceessss aatt tthhee uunniittss..

2006 2007 2008

CurrentRTM

DesiredRTM

Phase IRTM


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Heres an example illustrating RTM planning town and distributor-wise, using the approachdescribed above.

Say, theres a sample Area Sales Manager (ASM) territory with metro power town and rural markets. The areadetails includingdistributor wise outlets, volume, and growth over previous year, are displayed in the excelsheet below.

For RTM Planning:

1. We first draw up the current RTM Photography post carrying out all the relevant diagnostics in the previoussection.

Name of Town Type of Town Population Outlets Volume

s r u o

r

Effectivess index DistrName Outlets Volume LY Vol Gr vs PY

Distributor

StrenghtIndex CurrentDistr ROI Current RTMModel

City A Metro B 1,000,000 2,564 461,780 5 D 1 750 150000 5% 8 17% 10 Distr Town

D 2 330 59400 -10% 6 15% 10 Distr Town

D 3 180 23400 -20% 5 12% 10 Distr Town

D 4 300 60000 4% 7 17% 10 Distr Town

D 5 220 44000 -5% 5 13% 10 Distr Town

D 6 94 11280 -30% 3 8% 10 Distr Town

D 7 120 16800 -18% 6 10% 10 Distr Town

D 8 140 23800 8% 7 14% 10 Distr Town

D 9 300 51000 2% 4 10% 10 Distr Town

D 10 130 22100 2% 5 12% 10 Distr Town

Town A Power Town 120,000 287 37,321 2 D 11 201 26124 0% 7 10% Small 2 Distr Town

D 12 86 11196 -10% 4 -3% Small 2 Distr Town

Town X Rural 14,000 28 3,360 3 D 13 28 3360 -5% 6 12%

Currently an AMC

under a distributor

near the plant

Town Y Rural 14,000 25 3,000 2 D 14 25 3000 -10% 5 5%

Currently serviced

from plant as an

RD

SE 1

ASM 1

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oo DDiissttrriibbuuttoorr EEffffeeccttiivveenneessss IInnddeexx::ccaallccuullaattiioonn sshhoowwnn iinn pprreevviioouuss sseeccttiioonn

oo DDiissttrriibbuuttoorr SSttrreennggtthh IInnddeexx:: CCaallccuullaattiioonnsshhoowwnn iinn tthhee pprreevviioouuss sseeccttiioonn

oo TThhee ccuurrrreennttDDiissttrriibbuuttoorr RROOIIoo TThheeccuurrrreenntt RRTTMM mmooddeell ffuunnccttiioonniinngg iinn

tthhee ttoowwnn


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2. Based on the above data, we need to derive action plan by distributor for each city/town in the territory.

First, lets take City A which is a Metro B with 10 distributors.

We make following observations for City A based on data available:

The Distribution Effectiveness score is 5, which is definitely a reason for worry and needs immediateattention.

Very few distributors are making a healthy ROI; the ROI varies significantly from -3 % to +17 %.

Distributor Strength is also varying across all the parties.

Last year volume performance is also varying drastically between the distributors from 30% to +8 %.

Name of Town Type of Town Volume

Distributo

r

Effectives

s index

Distr

Name Volume LY Vol Gr vs PY

Distributor

Strenght

Index

Current

Distr ROI

Current RTM

Model DSD Anchor Distr Consolidation

City A Metro B 461,780 5 D 1 150000 5% 8 17% 10 Distr Town

Should be

converted to

Anchor with

main markets

of the city - Add

area D 5, D 7, D9 , D 10

D 2 59400 -10% 6 15% 10 Distr TownClose / Consolidate

with D 1


with D 1

D 4 60000 4% 7 17% 10 Distr TownContinue add D 6

area

D 5 44000 -5% 5 13% 10 Distr TownClose - Add area to

Anchor D1


with D 4

D 7 16800 -18% 6 10% 10 Distr TownClose - Add area to

Anchor D1

D 8 23800 8% 7 14% 10 Distr Town

Keep as he is in a n

isolated part of city

Needs support to

beefup ROI

D 9 51000 2% 4 10% 10 Distr TownClose - Add area to

Anchor D1

D 10 22100 2% 5 12% 10 Distr Town

Close - Add area to

Anchor D1

For key

Accounts

run DSD Pre

sell route

from the

plant

(Annual Vol

1 lac phy

cases) -

Since it is

plant town

Heres the detailed RTM plan drawn for City A:

Since City A is a Metro B town with a plant attached to it with a lot of prestigious and high volume keyaccounts, we should run a DSD pre-sell route from the plant for least RTM cost.

Since it is a Metro B, as per the RTM Directional Gridwe are proposing that we move to an AnchorDistributor Model.

The largest distributor in the city, D 1, is also having a high Distribution Strength of 8. So, we need to initiatediscussions with him to convert him to an Anchor Distributor.

We shut down a lot of unprofitable distributors like D 2 , D 3 , D 5, D 6, D 7, D 9, D 10, and merge withAnchor, or based on geographical location, merge with the other viable distributors we intend to continue.

Distributor D 8 is a sitting in a geographically isolated area that would be difficult to cover from the locationsof remaining distributors. Moreover, he relatively has a high Distributor Strength Index, so he needs tocontinue. His ROI is low, and need to re-look at his cost structure and see ways of improving his ROI.

RTM Plan

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So, summarizing the above, a 10-distributor Metro B Town with low Distribution Effectiveness Index andmany unprofitable distributors is converted to:

DSD route from plant for key accounts One large anchor distributor Two very viable and aligned distributors with a high Distributor Strength

Now we draw up the plan for Town A which is a Power Town:


Distributo

r

Effectives

s index

Distr

N am e V olu me LY V ol Gr vs PY

Distributor

Strenght

Index

Current

Distr ROI

Current RTM

M od el D SD An ch or D ist r C on so lid at io n

Town A Power Town 37,321 2 D 11 26124 0% 7 10% Small 2 Distr TownConsolidate Entire

Area under D 11

D 12 11196 -10% 4 -3% Small 2 Distr Town Close

The solution here is obvious; we need to merge the two areas under distributor D 11.

After merging, check the ROI. If we still have a problem, then we need to look at the cost structures of thedistributor and see how to improve his ROI.

Next we draw up the plan for Towns X and Y, which are rural areas.


Distributo

rEffectives

s index

Distr

Name Volume LY Vol Gr vs PY

DistributorStrenght

Index

Current

Distr ROI

Current RTM

Model Milk Run Distr AMC

Town X Rural 3,360 3 D 13 3360 -5% 6 12%

Currently an AMC

under a distributor

near the plant

As is near

plant area

convert to

milk Run

Town Y Rural 3,000 2 D 14 3000 -10% 5 5%

Currently serviced

from plant as an

RD

Very far from plant

needs to be

attatched to nearest

Distributor as AMC

RTM PLAN

Town X is actually near the plant area and can be converted to a Milk Run Route. As he, becomes a directdistributor his commission will go up and hence his ROI will improve.

In Town Y:

o We have a distributor with a low Distributor Strength as well as low ROI.

o The distributor is a small distributor and his viability is going down, as he has to invest in largequantity of stock relative to his volume because of distance from the plant.

This is a Power Town with two distributorsboth of whom are not having sufficientvolume, ROI, and Distributor Strength

index for one of them is really low.

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In both towns X and Y, theDistribution effectiveness index isvery low. The Distribution Strength isnot sufficient and current ROI is understress.


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o He needs to be shifted under a Distributor in a Distributor AMC kind of model. His AMCcommission needs to be worked out to make sure he is viable.

o Given the low Distributor Strength, we may even look at changing the distributor and setting up anew AMC party altogether.

The key actions based on the above analysis would be any of the following:

DSD in certain locations with percentage of DSD volume targeted

Anchor distributors in certain locations with percentage of anchor distributor volume target

Distributor consolidation

Start of Milk Run and percentage of volume to flow through the same

Markets where Area Market Contractors (AMCs) need to come up and number of AMCs (a very smalldistributor may have to be made an AMC, and some new locations may need to be identified to start up AMCoperations).

Below is a sample RTM Action Plan template.

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2.3.2 RTM Roadmap: Integration into Annual Business Plan (ABP)

On an all India level, the RTM footprint directionally is expected to be as depicted below:

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Direct: 60 %

Anchor: 5 %

In-direct: 35 %

In-direct: 100%

In-direct: 85%

Distr & AMC: 14%

Milk run 1%

CURRENT

High drop size, high growth potentialmarket converted to CBO run DSD

Robust and sustainable AnchorDistributors Appointed.

Unviable & Unsustainable distributors to be rationalizedStable Distributors consolidated, territories enlarged.High VPO, high NR markets, converted to Anchor / DSD

Unviable & Unsustainable Distributorsclosed

Sustainable spokes supported /converted to distributors.

Small geographically far spreaddistributors serviced by Milk Runs

HVO, Key A/C converted to Pre -sell

Rural

PowerTown

Metro

End 08

Direct: 75 %

Anchor: 20 %

In-direct: 5 %

In-direct: 85%

In-direct: 80%

Distr AMC: 10%

Milk run 10%

DSD/Anchor:15%


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f

Systems

DistributionInfrastructureOptimization

RTM Correction

End 08

Stock Availability : 97%

No of Distributors: 2500 Metro DSD % : 75% Metro Pre-sell % : 40% Business thru Anchor : 15% Cost as % NR : 12%

Business under DAS : 60% of indirect

Business under CRS : 60% of indirect Handheld : All Metro DSD DSD Router : All Metro DSD

No of warehouses : Fleet uptime : 90% Glass Turns : 5.5 Audit Score : 85%

Current

Stock Availability : 92%

No of Distributors: 3500 Metro DSD % : 60% Metro Pre-seill % : 14% Business thru anchor : 3% Cost as % NR : 14%

Business under DAS : 3% of indirect

Business under CRS : 31% of indirect Handheld @ DSD: 2 Metro, 8% of Vol DSD Router : Nil

No of warehouses : Fleet uptime : 70% Glass Turns : 4.1

RTM Roadmap


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PART 3:RTM INFRASTRUCTURE DESIGN AND

MANAGEMENT


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Chapter 3.1:DSD Operation

Introduction

Direct Store Delivery (DSD), commonly referred to as direct route operation, is a model focused on servicingcustomers without any intermediaries. It is a critical part of the RTM operations.

This chapter covers following DSD operations:

DSD route designing

Warehouse management

Stock management

Fleet management

Invoicing and settlement

DSD Cost Per Case (CPC) calculation

3.1.1 DSD Route Designing Process

Key inputs required for DSD Route Design

Pack-wise month-wise total volume and average season

Off-season drop size

Outlet base and EDS

High Volume Outlets (HVOs) exclusive outlets

Service frequency required by outlet

Geographical spread

Percentage of outlets and volume for pre-sell and ready van sale Channel construct of the area

Estimated channel-wise average In-outlet time

11 33

Get Data forEvery Dealer

44

CalculateNo. of Vehicles and

Vehicle CapacityRequired

CreateRoutes

CreateZones

22

LocateOutletson Map

55


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Get Data

Get complete EDS of all outlets with details like outlet name, address, annual volume, and service frequencyrequired by each outlet.

Sample EDS Data Required for Route Design

Outlet

No.

Route

No. Accou nt Nam e Addresses

Service

Freq.

Trade

Ch an ne l Volu m e

1 114 Alexus Deli 692 Greenwood 3x 147 12

2 117 Alph 's Bar and Grill 723 Angier Ave. 2x 020 8

3 114 Andriotti's Restauran t 578 North Ave. 2x 018 104 114 Athen ian Pizza 680 Greenwood 1x 018 9

5 118 Buggeh ti's 601 North Ave. 1x 018 30

6 116 Carl's Quick Stop 124 Win ton Terrace 1x 004 12

7 101 Ch ateau Efite 410 Rankin St. 1x 018 6

8 116 Ch inese Buffet 783 Angier Ave. 3x 018 9

9 120 Connie's Conven ience 550 Greenw ood 1x 003 14

10 122 Crown 's 212 Ponce De Leon 2x 147 18

11 112 Dante's Deli 598 Angier Ave. 1x 147 9

12 124 Deano's Diner 114 Morgan St. 1x 018 20

13 117 Dillion 's 215 Somerset 2x 020 6

14 114 Discotheque Unique 273 Ponce De Leon 1x 035 24

15 118 East of Eden 105 Somerset 1x 035 30

16 115 Fan Faire 218 Bonaventu re 1x 018 35

17 115 Fielder's Rest Stop 653 Ponce De Leon 3x 147 7

18 123 Freda's Lunch Room 109 Somerset 1x 018 15


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Locate Outlets on Map

Locate all the outlets gathered in step 1 on a map to get a complete picture of the area.

SAINT CHARLES WAY

SAINT CHARL ES AVE.

ONE

WAY

ONE

WAY

ONEWAY

ONEWAY

ONE

WAY

NORTH AVE.

EDITHS

T.

WILMER

EGGLESTON

ASH

LEY

AVE

.

RANKINRANKIN

ANGIER

ANGIERAVE.

RALP

H

WILLOUGHBY

EAST AVE.

TO PLANTWA

Y

ST.

AVE.

MORGAN

DALLAS

ST.

ST.

ST.

ST.ST.

EL

IZABETH

BERNIN

A

WILLIAM

SMCGIL

L

ENSL

EY

ST.

WOODALLST

.

BELG

RADE

AVE

.AN

GIER

SPRINGS RD.

LEON

MAIDENLA

GREENWOOD

SAINTCHARLES

GREENWOOD

AVE.

PONCE

BARNETT

FORD

PL.

AVE.DE

PONCEPONCEDE

LEONCT.

SOMERSET

TE

RR.

LAKEVIEW

AVE.

ARNOLD

DRIVE

IRIS

ARNOLD

ST.

ST.

BONAVENTURE

BARNETT

ST.

3

10

12

1113

18 19 20

2117

16

15

14

31 3024

23

25

22

6

3935

33

4041

38

32

42

3736

34

29 28

4 5

43

49 50

47

46

45

44

48

1

27

26

7

8

9

2

Outlets locatedand numbered


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Create Zones

Zones need to be created for a very large city. This helps in getting the average number of routes.

Create manageable zones based on proximity from supplying location.

Keep the zones geographically contiguous with natural locality boundaries.

Create zones in a way that the volumes are balanced in these zones.

Calculate No. of Vehicles and Vehicle Capacity

1. List all the outlets within a zone with the volumes and their required service frequencies.

2. Classify the outlets that can be on pre-sell (ideally all High Volume Outlets (HVOs) which havemonopoly should go on to pre-sell) and those for Ready Stock sale.

3. For all Ready Stock retail outlets in the zone, take the weighted average of the service frequency.

4. Take the average drop size for the zone.

Create separate routes for season and off season.

5. Each zone will have a known stem time (Driving time taken from Plant or Depot to the first outlet for aparticular route in the zone).

Here is a format for calculating time available:

1

2

3

4

5

67

9

8

1

1Sale

Center1 Cover outlying

areas first whilecreating zones.


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Time Amount in

Minutes

1 In-plant Time - Morning

2 In-plant Time - Afternoon

3 Stem Time - Morning

4 Stem Time - Afternoon

5 Breaks

6 Total Number of Minutes: Time not available for route

7

8

9 Time in the Workday (___ hours X 60 minutes)

10 Less Time Not Available

11 Time Available per day

6. Then based on estimated in outlet and average between outlet time (based on geographical spread

of the area), calculate how many outlets can be done by a route in a day in a particular zone. This isof course after removing sufficient time for in Plant/Depot time.

7. Based on the weighted average service frequency for a zone, calculate the no. of days between twodeliveries as follows:

8. Calculate the number of outlets to be covered in a day in the zone

9. Calculate number of vehicle needed to service the area.

No. of outlets to be covered in a day in zone = Total outletsNo. of days between two deliveries

No. of vehicles needed in an area = Total outlets to be covered in a dayNo. of outlets one route can do in a day

No. of days between two deliveries = 6 (Total No. of Working Days in week)Avg. Service frequency


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10. Calculate sale generated on a route in a day.

11. Vehicle capacity = Sale generated x 1.2

Since the vehicle need not carry the exact SKU mix as required by the outlets and the demandcould normally be variable, so 1.2 safety factor is taken into account.

This step is a gross level calculation of number of vehicles required and the possible capacity of thevehicle.

Finally, the exact routes still need to be drawn up before actual purchase decision of thevehicle is taken. This is covered later in this section.

Example showing how to calculate number of vehicles and vehicle capacity, based on formulaecovered above, and how hybrid system for routes can impact this requirement

Scenario 1

A zone has following details:

Total outlets = 600 outlets in peak seasonAverage drop-size = 2 cases per visit.Outlets the salesman can do in a day = 35Average service frequency required in the area = 3x.

Lets see how to find out the number of vehicles needed and their required capacity.

Sale generated on a route in a day =Average drop size per outletxNumber ofoutlets a route can do in a day

Accounts on pre-sell route

Accounts on conventional route

It is better to havehybrid system forroutes as onevehicle size does

not fit capacityrequired for all


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No. of days between deliveries = 6 / 3 = 2 (as per step 7 above)

No. of outlets to be covered in a day in zone = 600 / 2 = 300 (as per step 8 above)

No. of vehicles need

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