Phillip Morris Pakistan Supply Chain Analysis
•
1 like•491 views
Phillip Morris Pakistan Supply Chain Analysis
Recommended
More Related Content
What's hot
What's hot (20)
Similar to Phillip Morris Pakistan Supply Chain Analysis
Similar to Phillip Morris Pakistan Supply Chain Analysis (20)
More from Ayesha Majid
More from Ayesha Majid (20)
Recently uploaded
Recently uploaded (20)
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
- 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
- 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
- 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
Editor's Notes
- P4: Moreover, strong competition from PTC Brands exists so it is quite obvious for PMPKL to ensure it is fulfilling the needs of the retailers providing them enough incentives to cater to the shelf placement of their brands.
- QUAL. ANALYSIS focuses on the physical flow across the distribution network. Supply chain management has two part planning and execution. Distribution Network Designing is the core component of the planning stage
- quantitative aspect of distribution channel
- Project outcome & Impact
- 1. Thus, a Distributor was sold a Case for say Rs. 50 and he sold it for Rs. 52 and kept Rs. 2 for himself. He would bear all the cost. Due to various reasons, including changing of prices, brands and packs, consumers were confused and PMI lost its market share. The great lesson for us that if you are the Market Leader you have to maintain your share: One mistake can cost you dearly.