1. Distribution Channel Management Week 6

2. (4) Managing The Channel Manufacturer Channel Choices Managing the Channel Supporting Promotion Distributor Selling & Distribution Stocking Delivering Collecting Merchandising Wholesaler Selling Retailer Selling Customer Services Manufacturer Channel Choices Managing the Channel Supporting Promotion Internet Retailer / Dropshipper Selling (Stocking) Merchandising Customer Services Logistic Provider (Picking Up) Delivering

3. Managing the Channel Tasks 1.Setting pricing per layer, make sure you give enough margin per distribution layer. Examples: Product Tea 500ml RTD CBP = 3500 RBP = 2800 ( 20% margin ) WBP = 2650 ( 6% margin ) DBP = 2500 ( 6% margin if sell to WS,12% margin if sell to R) 2.Setting & Empowering Distributor Sales Force to deliver the Biz objectives 3.Making sure Distributor Profitability

4. Distributor’s Scope of Work Distributor is Principal extension in the Market as Principal representative Distributor is given the right to serve specific channel / market by the Principal That’s why there should be distribution agreement between them before the works started Selling & Distribution # sales force/channel/area # outlet covered # outlet transaction/month # item sold/outlet/month # sales value/month Stocking Total inventory (days) Inventory per item (days) Account Payable (days) Out of stock (#item/month) Delivering OTD (% on time delivery) OTIF (% on time delivery in full) Collecting Account Receivable (days) % overdue Merchandising % product placed at eye level # item at eye level/store/month % product with right price tag Distributor Key Performance Indicator

5. If your Distributor Sales Force doing well = Your Product doing well Managing your channel in day to day means you are managing distributor sales force in day to day basis The Distributor Sales Force is the most important assets for you Managing them means that you have to empower them to do the tasks

7. We expect Distributor doing selling, distribution, stocking, delivering, collecting, and merchandising. What do they get in return? Gross Margin = --------------------------- x 100% Operating Margin = -------------------------------------------------------------------- x 100% Sales - COGS Sales Sales – COGS – Overhead Cost – Distribution Cost

8. Components of Distribution Costs Distribution Cost is also called Cost to Serve, meaning all cost occur as the consequence of serving specific market Note: Not all costs is exist for each channel type

9. Maximizing Profit through Working Capital Cycle

10. Make sure your Distributor can gain better Return on their investment compare to Bank’s Interest Rate Invested Capital Operating Profit -Tax Return on Invested Capital (ROIC) ROIC = --------------------------------------------- Sustainable Distribution Business if ROIC > Interest Rate Non-Sustainable Dist. Business if ROIC < Interest Rate

11. Your group paper about (4) Managing the Channel for your chosen product, should be submitted …..March 2014. It accounts for 30 points of Nilai Tugas… The Tasks should contain 1. Setting Price per Distribution Layer 2. Setting Distribution Sales Force # of people 3. Identify Distribution Costs occur on selected channel and how big is the Distribution Cost If there’s something you need to ask about this task, feel free to find me in the lecturer room, or contact me to make appointment. Every group eligible for 1 consultation meeting with me. You decide whether you need to use this privilege or not. This is optional not an obligation.