Phillip Morris Pakistan Supply Chain Analysis

1. PHILIP
MORRIS
PAKISTAN
Group 10
Ayesha Majid, Donia Ismail, Eleena Naz, Sharmeen Abbas

2. Introduction
Philip
Morris
(Pakistan)
Limited
(“PMPKL”)
Manufactures tobacco PMPKL
subsidiary of Philip Morris International, a leading international
tobacco company
It was incorporated in 1969.
It is headquartered in Karachi, Pakistan
It has 15 sales offices with 739 employees

3. Brand
positioning
• PMI had its headquarters in Karachi in the Dolphin Mall
• PTC’s market share would be around 45% and PMI’s share would be
around 15%.
• PMI’s most famous brand was Marlboro but its market share in
Pakistan was low.
• Share of Market depends on Market Availability and not on Offtake
– if in the Market there were 20 cartons and 10 belonged to PTC and
PMI each, Market Share would be 50% each, irrespective of off-
take.
Product
positioning
High Price
Low Price
Young Mature

4. Non
Tobacco
products

5. Stakeholder
s

6. QUALITATIVE
ANALYSIS

7. Marketing
Strategy • Uses a Push Strategy to make sales.
– As the company produces cigarettes the forecasted demand is
quite accurate
– Primarily due to known consumption rates presumably.
– All supply forces are directed towards selling all cigarettes
forcibly as it is a push strategy so all produced is sold.
• the target market and targeted consumers are very
specifically only the ones who are smokers already.
– Acquiring new customers is not the policy of the company in any
case
– follows the specific rules and SOPs laid by the government and
the tobacco regulation industry
– New customers are not the focus, thus push strategy is followed.

8. Sales
Strategy
RSM = Regional Sales Manager.
ZSM = Zonal Sales Manager.
ASM = Area Sales Manager.
DSMS = Daily Sales Manager
Supervisor.
DSR = Daily Sales
Representatives.
• Spot selling is used by the company and all sales are on cash transactions only.
• No credit purchases or selling method is enabled by the sales force.
• The sales men personally visit shops on the field daily and take orders and deliver orders according to the specific on ground demand of the
retailers.
• They have to meet demand and ensure order fulfillment according to the desired retailer orders which are asked and offered on spot
• There is a very fixed predictable demand for the product
– company knows approximately how much to produce and how much to deliver.
– No formal forecasting method is implemented at the company.
• Sales was where the maximum pressure from the company was applied.

9. Trade
Marketing
• TPOSM includes branded cupboards, shelf talkers,
price jackets, posters, gondolas, trade letters,
buntings, mobile etc.
• These merchandising tools are a support function of
trade and are the form of contact with the consumer
during the time of purchase.
• PMI uses posters as theirTPOSM and the competition
here is tough as have to make their posters really
unique and attractive.
• PTC payed the retailers not to allow PMI put up their
posters where PTC had them.The problem was that
PMI didn’t have enough resources to pay the retailers
hence they faced an issue in this area.

10. Distribution
Network in
Supply Chain
Factors influencing Distribution Network
• Response time
• Product variety
• Product availability in markets
• Customer experience
• Order visibility
• Product or product part Returnability.
Warehousing & transportation expenses
• information management cost
• Facilities costs
For Philip Morris the key factors include its
customers
Deliver
value to the
customers
on ground
Product
standardization
Easy access to
the products
Minimal cost to
the customer

11. Goals and
Objectives of sales
manager
• Achieve maximum possible sales volumes
per year.
• Achieve maximum employee productivity
on the field as sales representatives.
• Future goals and objectives as assigned to
the area sales manager of Lahore region
Area sales manager
Sales rep
Daily sales men
Retailer/Vendor
Sales Force
Structure
Start of
Targets

12. Business
Strategy
• The two factories in Kotri and Sahiwal
– shipped cases to some 5Warehouses of the company which sent these cases to
the Distributors (around 180).
– Every morning the distributor placed an order to the company which created an
invoice and shipped cases to the distributor.
• The company set targets both primary and secondary.
– Even secondary sales had targets.
– Why? Because if there were no secondary sales there would be no primary sales.
– Primary sales were greater than Secondary sales.
– Why? Because the Distributor must have some Reserves.The company kept an eye
on stocks of its distributors.
• If a Distributor “over-achieved” its targets, was it good? One had to be careful
as it would reflect on your target-setting process.
• From the Distributor the shipment reached the Retailer.
– There were some 256,000 retailers in the country.
– This process was managed by the DSR (Distribution Sales Representative) who
was over-seen by DSS (Distribution Sales Supervisor) reporting to a Supervisor
who reported to the RSM.
– Every DSR had its own target with his incentives. So, if his salary was say Rs.
15000, he would also get some incentives on achieving his targets.
– These targets were set by the top management of PMI.

13. Distribution
Network
Manufac
turing
plant
Kotri
Manufac
turing
plant
Sahiwal
tobacco-
leaf
threshing
plant in
Mardan
Farmer 1
Farmer 4
Farmer 3
Farmer 2
DC Lahore
DC
Peshawar
DC
Islamabad
Retailer
1 (tobacco
shops)
Retailer
2 (Khokkas)
• Distribution
NetworkTypes
1. Retail Storage with
Consumer Pickup for
non-smoke products
2. Distributor Storage
with Delivery for its
non-smoke products
Customer

14. Collaboration with
supply chain
members
• Build the right collaborative model
Point of Sale
Small
Vendors
Grocery
stores
Tobacco
Shops
Material
Flow
• Grown in KPK
• Sourced from
local farmers
Tobacco Leaf
• Done inhouse
• Quality is
assured
PMPL
• Formal Shops
• Khokas
LocalVendors

15. Tobacco
Processing

16. Cigarette
manufacturing
processes

17. Distribution
and
Incentives
Models
• PMI at first used the most easily understood Margin system.
– So long as the Distributors were making good volumes, the Margin strategy seemed fine.
– Now that they lost volume, they started grumbling, complaining and even leaving.
– That led to introduction of COST PLUS.
• Cost Plus
– meant the Company would reimburse the Distributor its costs.
– The costs include its Sales Force personnel’s salaries, air conditioners, fuel, furniture,
projector, workstation, stock carrying boxes, owners’ room, etc. - all the costs necessary in
selling the merchandise.
– So if the costs were Rs. 100 he was given Rs. 114 with Rs. 14 for achieving his target. So if he
achieved 100%Target then we could give a 2% incentive. If he achieved a 110% target, we
gave 4% incentive.
– Of course these incentives were not monetized but were in the shape of stock.
– These costs were audited.
• This led to a new problem:
– Say Distributor 1 was selling 500 Sc (shipping containers) and D2 was selling 100 but both
were costing Rs. 100 – in this case both will be reimbursed Rs. 100 but D1 would be unhappy.
– What was the motivation for him?
– This led to the HYBRID system which would reimburse the costs, but would also give a
margin on how much he was selling. Now both would be happy.
• Policy on Dumping
– Company has also strict checks on distributor’s free stocks.They have printed bar codes that
Is calibrated with name of distributors so that no distributor can sell the free stock to other
distribution market of some other region.

18. Supply chain
2 factories (Kotri
and Sahiwal),
5 warehouses 180 distributors 256,000 retailers
Head of sales
4 Zones (North Punjab,
South Punjab, Central
Punjab, Sindh),
6 regional managers
6 ASMTMEs
17 sales regions

19. Information
Flow
Post-Consumer
Waste
CommercializationManufacturingSourcingR&D

20. QUANTITATIVE
ANALYSIS

21. • SAP SD
• Rs. 300,000
• 80 – 100 lac
rupees
• Throughput=0.0
03 sec
• Lead time=1.5/3
hours
• Finished Good
• D.M
• EOQ=100
cartoons
EOQ
Trough-put
time & Lead
time
Cost
optimization
Channel
Management
Cost
Quantitative
Analysis

22. 2020
TARGETS

24. Our
Deduction
The financial performance have been
exceptionally well since the past few years
PMI (Pakistan) has set a new record for
tobacco exports in 2017
Should take into account the rising health
concerns
Working on smoke free products in the future