Contents

Channel 4 ................................................................................................................................................ 2
Distribution Channel Decision: ............................................................................................................... 2
Recommendations: ................................................................................................................................. 3
Channel 4
Salient features of Channels 4 are:

1. Appointment of distributors in the city to supply bread to the retailers in their respective
areas.
2. Distributors under this system maintain certain physical distribution facilities for lifting their
stocks from the factory and distributing them to the retailers.
3. City divided into nine viable zones, each zone having a distributor.
4. At 2 paisa commission, to break-even each distributor has to sell:
 2,300 loaves of 400 grams if he operated with Standard 120 vehicle.
 1,400 loaves if he operated by using three-wheeler Auto-Ricksaw.
 2.700 loaves if he distributed by four-wheeler 120 type vehicle.

Producer Distributor Retailer Consumer

Possible issues with the Channel:

1. Distributors might not be able to breakeven by achieving enough volume in the initial stages.
2. If many of the distributors find it unprofitable and decide to give up their distribution
arrangement with ‘Modern’, the company would be in a mess.
3. Distributors capability to develop the type of mass distribution retail organization expected
by ‘Modern’ is doubtful.
4. Distributors sell multiple brand products and might be distributing competitor’s product as
well
5. Chances of channel conflict

Positive factors:

1. Easy distribution
2. Wide reach across the city
3. Promotional activities through distributor if we have a strong control and relationship
4. Offer customized offers to distributors
5. Easy to replace distributors

Distribution Channel Decision:

 Distribution channel decision was taken by laying down basic objectives which must be satisfied by
any plan to be decided upon.

The following major objectives were laid down:

1. Bread should reach the final consumer with least possible effort on his/her part as it is a
convenience good.
2. Minimum possible time lag between production and consumer purchase to ensure the
freshness of the product.
3. Handling should be as little as physically feasible.
4. Distribution should be achieved at an economical cost to ensure a competitive position for
the company.
5. Distribution system should effectively meet the long-term objectives of the company.

4.
2. 3. Appointment of Distributors
Parameter/ 1.
Weightage Direct to Direct to
Objectives Sole Dist.
Customers Retailers
4- Auto-
Tempo
Wheeler Rickshaw

Reach with
0.15 2 2 3 3 3 3
least effort

Time Lag 0.15 3 3 4 4 4 4

Handling 0.15 4 4 3 3 3 3

Cost/loaf/day 0.35 0.6 0.65 1.13 1.32 1.30 1.14

Meet long
term 0.20 2 2 3 3 3 3
objective

Rating 1 1.54 1.512 1.7045 1.638 1.645 1.701

Recommendations:
The bread was distributed in Ahmedabad through restricted outlets either at the bakery itself or
through vendors. No bakery had attempted to achieve an intensive distribution of the product either
by using various types of retailers available in the market or by developing its own mass distribution
organization. Also, as all the bakeries did their own distribution, there were no other distributors or
wholesalers in the trade. For developing a distribution system. Most of the information we have
about various wards of the city is of a qualitative nature, gathered largely through observation and
discussions with informed sources. Only population data is available ward wise.

Major adjustments might be necessary if impression of qualitative data doesn’t match quantitative
findings as the characteristics of the wards present production of bread need not be true indicator of
actual demand because of shortage of raw material.

The present quota allotment is on the basis of actual consumption in the base year 1963-64. With
growth in population and changing food habits, actual demand could be higher than the present
production. This could also be supported by the fact that almost all the bakeries had asked for
additional allotment of ‘maida’ from the Government, and there were requests from new parties
who wanted to enter the market in case they could obtain some quota allotment. If their additional
requirements were considered the demand would be around 49,360 loaves of 400 grams or 19,854
kgs. per day

After keeping economics, efficiency and effectiveness of each one of the channels we arrived at the
best possible decision while also keeping in mind the objectives of the company and its long-term
goals.

Distribution Alternative Ranki

ng

Direct to Retailers
1

Appointment of Distributors- Auto rickshaw

2

Appointment of Distributors- Tempo

3

Appointment of Distributors- 4-wheeler

4

Sole Distributor
5

Direct to Customers
6

Recommendation 1 – “Direct to Retailers”

 • Better reach
• Less time lag Direct distribution to the consumer
• Better control on distribution

Recommendation 2 – “Appointment of Distributors- Autorickshaw”

• Lower no. of loaves to break-even per day

• Lower fixed and variable costs

Regarding the type of retail outlets to be used, their number in different location and facilities to be
offered to them:

• Regarding the retailer’s compensation, they would get 10, 5 and 2 paisa for 800 grams,
400 grams and 200 grams of bread respectively.
• These figures would be fixed for whatever distribution arrangement are made where
retailers were to be a part of the scheme.
• No working capital would be locked in giving credit to other parties and hence
‘Modern’s’ distribution business would run on cash basis only due to botheration of
credit collection and carrying of credit risk.