Clm (faces) stam

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Clm (faces) stam

  1. 1. Cup Moscow 2011 >> 1st round Case Reorganizing Inmarko distribution network in the Central, Northwest, Southern & North- Caucasus federal districts Team Faces
  2. 2. Goals & current situation analysis Inmarko distribution network will be restructured in the Total increase in Inmarko sales, bln rub. Central, Northwest, Southern & North-Caucasus federal districts to respond to 2011-2015 11,53 x 2 = 23,06 its goal – to double the sales in monetary terms in Russia up to and including 2015 Sales increase in Sales increase in “eastern” The ice cream market in Russia is developing and has a continuous 10,3% “western” regions regions (all other ones) growth rate per year (CFD, NWFD, SFD, NCFD) At the expense of The ice cream sales in Russia (bln rub.) the market increase Inmarko The ice cream market At the expense of At the expense of 7,48 x 1,482 = 11,08 the market increase the penetration level 76.3 4,06 x 1,482 = 6,01 increase 51.48 11,53 – 5,56 = 5,97 23.06 11.53 As a result, the share of “western” districts’ sales in total Inmarko 2011 2015 E sales will grow in next 4 yearsThe market is divided by 5 largest producers that together take 70% of Share of Inmarko region sales in total Inmarko salestotal market sales. To double its sales Inmarko should strongly Central FDpenetrate the market of “western” regions and take the market shares 2011 2015 Eof its rivals away. North-Western Producers value Producers volume price per 1 kg, FD 24% 26% Producers South FD 48% share shares rubles 4% Inmarko 22,4% 16,6% 172 65% 7% North- 4% Nestle 14,7% 6,3% 297 15% Caucasus FD 3% Iceberry 13,5% 8,0% 215 all other FD 4% Russki Holod 6,8% 6,9% 126 Talosto 6,3% 5,7% 141 Others 36,3% 56,5% 82 Double sales growth will be provided by the reorganization of distribution network to the appropriate level.
  3. 3. The results of reorganization *The expected share of Inmarko in the district in 2015 69% TT 14% MT 27%* = 1,5 bln rub. 7 795 pallets 17% KA Own warehouses in: 70% TT Moscow 8 000 pallets 32 601 15% MT 23%* = 6,03 bln rub. pallets 14% KA Voronezh 3 500 pallets SPB 6 000 pallets 80% TT 13% MT 35%* = 3,56 bln rub. Rostov-na-Donu 4 000 pallets 12 204 7% KA pallets Volgograd 3 500 pallets Krasnodar 4 000 pallets 4 730 82% TT Yaroslavl 3 000 pallets pallets 13% MT 18%* = 0,89 bln rub. 5% KA Kaluga 2 000 pallets
  4. 4. Types of channels of sales Traditional trade Modern trade Key accounts+ The largest part of total + Ideal for spontaneously + Provide strategic partnership demand-55-85 % purchases+ Stalls, Street traders, grocery + In some cases production is store – represents Inmarko’s + Wide range of Inmarko brands delivered to their warehouses logo+ Most promising channel for - Low penetration into country + Fast-growing segment ice-cream area - For take-home consumption, so- Little amount of purchases per its share is low outlet 1 2 3 High-Priority channel Medium-priority channel Low-priority channel (It is necessary to settle branches (Most important in urban areas, such as Moscow (But we should pay attention to this within traditional trade segment) and St.Petersburg) channel in some areas with high share of take-home consumption)
  5. 5. Opening branches: own distribution networkThe example of branch functioning for a representative city Assumptions: • there are 80 supermarkets (50 of which Costs per month: 500 000 people are large network stores) driver ‘s salary (50 000) • there are 40 restaurants and cafes x ( including 15 network ones) 370 ml rub. (sales of ice cream) 10 trucks • there are 150 retail outlets and small + shops consumed: sales specialist’s salary (35 000) *the Inmarko logistics service delivers 2000 tn x goods to the distribution warehouse of the 8000 pallets 10 specialists network store. Inmarko also delivers goods + and provides chests to small shops. 1150 pallets Overheads (200 000) Inmarko 1 050 000 rub. One-time costs : Tula Yaroslavl 1 for 25 sales otlets 20 stalls Ryazan X Lipetsk 20 Inmarko stalls Price stall Voronezh + Rostov 3 Sales specialists (branches) + 7 sales 10 trucks Krasnodar specialists (others) x 20 stall sellers Price of truck + Astrahan Staff search + License
  6. 6. Own distribution network The influence of factors on the choice of kind of distribution If there are several distributors in a region, we choose the one with the network ("+" - the preference of own network, "-" - the highest level og CCFOT, as our main goal is to foothold on a region market. preferences of distributors services) North-Western FD Distance (the DesiredFederal District closeness to large influence on Sales in total markets) prices Inmarko sales Disributor Area in FederalCFD + + DisctrictNWFD - - Beta Archangelsk, Severodvinsk 5%SFD + + Distributor № 4 Syktykar 4%NCFD - - LED Vologda Cherepove 6%We choose to use distributor services, when sales in Distributor № 5 Murmansk Apatity 4%some region are not very important in comparison withtotal sales of the company. Till 2015 Inmarko expectsto increase its share of region sales in total region sales South FDin each “western” region. Although, the share of Distributor № 20 Elista, Astrahan 15%Inmarko sales in North-Western FD and North-Caucasus FD in total Inmarko sales will amount to 6,5%and 3,9% correspondingly => We prefer to use North-Caucasus FDdistributor services instead of creating its owndistribution network with a sharp increase in costs. Grozny, Makhachkala, Nazran Distributor № 22 50% Vladikavkaz, Nalchik,We also prefer distributors when the ice-cream market in Distributor № 23 Cherkessk 33%some far regions or cities is quite large. In this case it ismore beneficial for Inmarko to conclude a contract with Stavropol, Region of Distributor № 21 Caucasus Mineral Waters 13%an exclusive distributor, that has its own transport andstorages and allows to maintain the appropriate price Central FD (because of lack of own resources)level on different brands of ice-cream. Distributor № 17 Moscow 18% Central Logistic Moscow, The Moscow region, Company Vladimir 30%
  7. 7. Risks assessment risk threats Avoiding riskThreats 1) Overpricing - Recommended level of prices by a distributor - Bonuses for the plan fulfillment 7 2) Loss of a Provide maximum discounts to the 2 major largest distributors 5 1 distributor 3 3) Weak marketing campaign in the region development before entering 4 of the brand in 6 the region 4) Long Standardize the contracts negotiations with the dealer 5) Increasing Monitor competitors, make Probability of risk appearance competition acquisitions if possible 6) Increase of Making long-term contracts rental cost of storage and High risk trucks 7) Decline in Promotion of cheaper brands Average risk demand caused by external shocks Low risk
  8. 8. Appendix 1. The schedule of goods delivery to distribution warehouse amount of goods amount of The warehouse should be of size suitable for keeping the delivered to realized goods kept in the warehouse (%) warehouse (%) l%) excess of production (the difference between produced and realized goods).sept 8,3 4 4,3 (1) The factory in Tula produces oct 8,3 4 0,3 (2) + 8,3(1) nov 8,3 5 3,6 (2) + 8,3 (1) 8,3% = 100%/12m dec 8,3 5 6,9 (2) + 8,3 (1) of annual production per month. jan 8,3 5 1,9 (3) + 8,3 (2) + 8,3 (1) Assumptions: feb 8,3 5 5,2 (3) + 8,3 (2) + 8,3 (1) 1. The warehouse becomes empty to the end of themar 8,3 6 7,5 (3) + 8,3 (2) + 8,3 (1) = 24,1 season – so September is the time origin apr 8,3 9 6,8 (3) + 8,3 (2) + 8,3 (1) 2. Earlier produced goods are the first to be realizedmay 8,3 13 2,1 (3) + 8,3 (2) + 8,3 (1) jun 8,3 14 4,7 (2) + 8,3 (1) We need that amount of warehouses in the jul 8,3 19 2,3 (1) Central, Northwest, Southern & North-Caucasus aug 8,3 12 0 districts in total which will be capable of keeping 24,1% of(*) – amount of months the production was annual production.kept in the distribution warehouse 2011 46 080 pallets = 48 000 tn.* x 24,1% 2015 92 160 pallets are held in the warehouses* 48 000 tn. = 60 mln L.
  9. 9. Appendix 2. Costs: own VS rented transport Own transport demand covered by our own for transportation between for transportation within the Costs within city trucks between cities cities same city Hyundai HD500 with trailer Between cities: Sept. 100% 100% model Hyundai HD250 (18 pallets) Oct. 100% 100% Shmitz Cargobull (28 pallets) priceuseful life 3 610 000 rub. + 73 000 euro 5 years 113 500 $ 5 years x2,7 Nov. 100% 100% mileage Own Rented Dec. 100% 100% 800 000 km 250 000 km(5 years) Jan. 100% 100%truckers Feb. 100% 100% salary 50 000 x 2 persons = 100 000 50000 rub. Within the city: Mar. 83% 100% (per rub. month) Apr. 56% 100%fuel (per 27 rub./L. x 0,37 L/km x 14 000 27 rub./L. x 0,3 L/km x 4 000 month) km km x1,4 may Jun. 38% 36% 69% 64% service 1/2 of fuel costs 1/2 of fuel costs Jul. 26% 47% TOTAL Own Rented 418 891 rub. 151 378 rub. Aug. 42% 75% costs Rented transport Tula-Rostov 50 000 rub. (925 km) price per day (8h) = 7 000Tula-Moscow rub 20 000 rub. (184 km)average price 8137,49 rub. price per month = 217 000 per 100 km TOTAL costs 1 139 248 rub. 217 000 rub. The optimal amount* of purchased & rented transport The issue Using our own transport is more profitable in case of continuous (uninterrupted) use. Between cities 78% purchased 22% rented But due to the increase in demand in summer & its winter decrease most of purchased transport stands Within the city 57% purchased 43% rented idle winter or it could be scarcity of transport in summer. *calculations are presented in the attached excel file
  10. 10. Appendix 3. Key Accounts 2011 Expectations~ 90 large shops (X5 Retail Group, Increase of concentration up to 60% Auchan, Magnet & others) Some Key Accounts will enter10% of all Inmarko sales (40% of the cities with population of 200 000 Modern Trade) peopleThe main type of sales – the ice cream for home consumption

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