ITC's Distribution Channel: A Case Study in Supply Chain Management, Thesis of Supply Management

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CHANNEL DISTRIBUTION OF ITC

Submitted by: Aarush Sharma (01-MBA-17)

Tapas Sudan (67-MBA-17)

TABLE OF CONTENTS

• Introduction to Supply Chain Management

• Company Profile

• Product Line

• Product Profile

• ITC Distribution Channel

• Data/Information Flow in ITC channel

• Channel Member Management

• Management of Field Force

• Bibliography

INTRODUCTION TO SUPPLY CHAIN MANAGEMENT

Supply chain management is the management of the flow of goods and services and includes all processes that transform raw materials into final products. It involves the active streamlining of a business's supply-side activities to maximize customer value and gain a competitive advantage in the marketplace. SCM represents an effort by suppliers to develop and implement supply chains that are as efficient and economical as possible.

Care, Cigarettes and Cigars, Branded Apparel, Education and Stationery Products, Incense Sticks and Safety Matches, Hotels, Paperboards & Specialty Papers, Packaging, Agri-Business and Information Technology – the full stops in the Company’s name were removed effective September 18, 2001. The Company now stands rechristened ‘ITC Limited’.

Though the first six decades of the Company’s existence were primarily devoted to the growth and consolidation of the Cigarettes and Leaf Tobacco businesses, the Seventies witnessed the beginnings of a corporate transformation that would usher in momentous changes in the life of the Company.

Key landmarks in history of ITC limited

• 1925 – Packaging & Printing Business was set up as a strategic backward integration for ITC’s Cigarettes business.
• 1975 -Launch of Hotels business with the acquisition of a hotel in Chennai which was rechristened ‘ITC-Welcomgroup Hotel Chola’
• 1979 – ITC entered the Paperboards business by promoting ITC Bhadrachalam Paperboards Limited.
• 1985 – Surya Tobacco Co. set up in Nepal as an Indo-Nepal and British joint venture.
• 1990 – Acquired Tribeni Tissues Limited, a Specialty paper manufacturing company and a major supplier of tissue paper to the cigarette industry later merged with the Bhadrachalam Paperboards Division to form the Paperboards & Specialty Papers Division in November 2002
• 1990 – Agri Business Division set upreturnviewimage.jpg
• 2000 – Entered Lifestyle retailing business with the Wills Sport range of international quality relaxed wear for men and women. The Wills Lifestyle chain of exclusive stores later expanded its range to include Wills Classic formal wear and Wills Clublife evening wear.
• 2000 – ITC spun off its information technology business into a wholly owned subsidiary, ITC InfoTech India Limited
• 2001 -Introduction of ‘Kitchens of India’ ready-to-eat Indian gourmet dishes

• 2002 – ITC entered the confectionery and staples segments with the launch of the brands mint-o and Candyman confectionery and Aashirvaad atta (wheat flour).
• 2002 -Premium range of notebooks brand Paperkraft launched. Classmate range of notebooks was launched in 2003
• 2003 – Introduction of Sunfeast as the Company entered the biscuits segment
• 2005 – Launch of Personal Care portfolio that has grown under ‘Essenza Di Wills’, ‘Fiama Di Wills’, ‘Vivel’ and ‘Superia’ brands which have received encouraging consumer response and are also being progressively extended nationally
• 2007 – ITC entered the fast growing branded snacks category with Bingo!
• 2010 – ITC launched its hand rolled cigar, Armenteros, in the Indian market , available exclusively at tobacco selling outlets in select hotels, fine dining restaurants and exclusive clubs

FOCUS PRODUCT LINE

ITC one of the leading FMCG in the country which operates in Foods, Personal Care, Cigarettes and Cigars, Branded Apparel, Education and Stationery Products, Incense Sticks and Safety Matches, Hotels, Paperboards & Specialty Papers, Packaging, Agri-Business and Information Technology, Category, has come a long way from the when it started. The biggest harbinger in the ITC growth story has been Cigarettes, The category in which ITC still is the major player in the country.

ITC’s highly popular portfolio of brands includes Silk Cut, Insignia, Lucky Strike, Classic, Bristol, Gold Flake, Players, India Kings, Scissors, Capstan, Berkeley, Flake, Duke & Royal, Navy Cut. The Company has been able to

ITC DISTRIBUTION CHANNEL

A sales position report is generated weekly by the manager (cigarettes) at the distributor level. This report is submitted either to the area sales manager or the assistant manager.

The report contains the following:

Opening stock : It is the stock of an item (cigarettes) present at the beginning of the week. The stock which is left at the end of the week becomes the opening stock for the following week. The distributor takes the order every week whereas the retailers take the order after every two week. At the point of delivery distributors need to pay cash and collect stock, no credit is given on cigarettes.

Received stock : It is the stock which each distributor obtains at the beginning of the week from the godown (Area manager) and further distributes it to the wholesalers (maximum 1 month credit) and hawkers ( day credit).

Sale of the stock : This includes the total sale done by the distributors and the retailers from the stock in a week.

Damaged stock : Cigarettes have a shelf life of 3-6 month as they are highly hygroscopic. All damaged or unsold stock is bought by the company and sent to the factories where the tobacco is extracted, processed and new cigarettes are produced.

Channel member management

Monetary and non-monetary methods of rewarding : According to the HR policy of ITC there are no monetary or non-monetary rewards given to the channel members i.e. the distributors and the retailers. No benefits, no freebies or paid vacations etc. are provided to the channel members. Very rarely cash gifts are given which is related to the performance. No credit is given to the distributors for the purchase of stock (cigarettes). Even the retailers do not get any credit from the wholesalers and have to pay cash.

The wholesalers however get a maximum of one month credit from the distributor.

Target setting mechanism : There is a certain target which is set for the distributors. For the retailers there are no targets set. The target for the distributors is in terms of M-S, where 1 M-S is equivalent to 12000 sticks and 1 case is equivalent to 12 M-S. The distributors are given a target of 200 M-S per week.

Monitoring Mechanisms : The distributors are monitored by the Area Sales Manager and the retailers are monitored on by the Area Executives. The parameters on the basis of which the distributors are monitored are the following:

(a) Visibility of the products

(b) Availability of the products

(c) Maintenance of the existing.

Training and HR Inputs : The distributors are not given any training or HR inputs by ITC.

Management of Field Force

Monetary Method of Rewarding : As per the HR policy of ITC Ltd the field force is monetarily rewarded on the basis of the number of bills drawn on the distributors.

Non-Monetary Method of Rewarding : The field force of ITC Ltd is given unlimited medical benefits in terms of non-monetary methods of rewarding.

Target setting Mechanism : The field force is given targets in terms of the number of bills generated by an individual.

Monitoring Mechanism : The members of the field force reports to their immediate supervisor and this follows throughout the hierarchy.

Training and HR Inputs : The sales men of the distributors are under the payroll of ITC ltd. In case of mass recruitment the new sales force is given training by the HR department of ITC Ltd. As per the HR norms, ITC Ltd provides training to its own employees of the distribution network at regular intervals.