This document summarizes the selling capacity, costs, revenue, findings, and solutions for a company distributing soap. It finds that the optimal number of sales squads for minimizing costs is 23 squads, with each squad containing 10 salesmen and 1 supervisor. With this structure, each salesman can manage around 36 outlets on average. The document then divides the total outlets among the squads and calculates the expected costs and revenues. It determines the optimal structure allows the company to achieve its target of spending 10% of total revenue on management costs.
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In Logistics, a lack of coordination can lead to huge losses. Through this presentation, I have put forward the real-world problem, which the company I am working for went through recently and I was part of it. Though we made a profit of $33,000, was much lesser than we could have made.
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1. FACTS
SELLING CAPACITY:
Class A city: 100 Kg per Outlet
Class B city: 75 Kg per Outlet
Class C city: 50 Kg per Outlet
COSTS:
Servicing:
40/- per day for servicing of one retail or 40 X 5 = 200/- per outlet locally
**
Salaries:
Area Manager – 2000/month (24000 per annum)
Sales Supervisor – 1200/month (14400 per annum)
Salesman – 300/month (3600 per annum)
Advertising: Rs 20 Lakhs
Distribution: Rs 1/ Kg
2 Area Managers for Bihar
24000 X 2 = 48000 per annum
1 Sales supervisor is need for every 10 salesman
(3600 X 10) + (14400 X 1) = 50400 per annum
REVENUE:
7.5/- per soap of 75 grams
2. FINDINGS
Class A City: 200,000 Kg
100 Kg per Outlets 200,000/100 = 2000 Outlets
Class B City: 80,000 Kg
75 Kg per Outlets 80,000/75 = 1067 Outlets
Class C City: 260,000 Kg
50 Kg per Outlets 260,000/50 = 5200 Outlets
Total Production: 5,40,000 Kg for 8267 Outlets
Total Possible Revenue: 5,40,000 X 100 = 5,40,00,000
(1 kg=7.5 X 1000/75=100/-)
Expenditure =
20,00,000 (Advertising cost) + 540,000 (Distribution Cost) + 2 X 24,000
(2 Area Mgr. yearly salary) + 200 X 8267 (Servicing Cost for Outlets) =
42,41,400
Marketing Expenditure:
For 10% of turnover i.e., 54,00,000
54,00,000 – 42,41,400 = 11,58,600
For 15% of turnover i.e., 81,00,000
81,00,000 – 42,41,400 = 38,58,600
Total no. 0f Squads the company can afford is
11,58,600/50400 = 23 Approx. to 38,58,600/50400 = 76 Approx.
* 1 Squad = 10 Salesmen and 1 Supervisor.
3. Solutions of the questions:
To minimize the cost we take least possible no. of Squad 23 (i.e., 230
Salesmen and 23 Supervisors) and divide it by total no. of Outlets
8267 / 230 = 36 Outlets (Approx)
So, every Salesmen is ready to manage 36 Outlets than Salesforce is ready for
8,280 Outlets.
Territories:
Class A city = 2000/36 = 5 Squad
Class B city = 1067/36 = 3 Squad
Class C city = 5200/36 = 14 Squad
* Total = 23 Squad for 8267
Cost to Management:
230 X 3600 + 23 X 14400 = 11,59,200
* Total Management Expenditure = 42,41,400+ 11,59,200 = 54,00,200 which
is 10.0003 % of Total Revenue 5,40,00,000.
Sales Target per Salesman:
Class A city 200,000 Kg / 50 (Salesman) = 4000 kg
Class B city 80,000 Kg / 30 (Salesman) = 267 kg
Class C city 260,000 Kg / 140 (Salesman) = 1587 kg