FMCG FMCG are products that have a quick shelf turnover, at relatively low cost and don't require

a lot of time and financial investment to purchase. Examples- Pepsi, Lux, Colgate etc. Indias FMCG retail industry is of US $25 billion ,growing at a rate of 12 % annually. FMCG is the 4th largest sector in the Indian economy. Distribution: Activities concerned with efficient movement of goods in one direction (from company to the consumer), and the payments generated by them flow in the opposite direction (from consumer to the company)

FMCG Distribution In INDIA:

The distribution of products in the FMCG market in India is one of the longest supply chains an industry could really have. There are as many as 5 levels of intermediaries involved in the entire distribution channel through which a product passes before reaching the end consumer. The margins kept by these intermediaries range from 2% to 5%. FMCG distribution network spreads across six million retail outlets (including two million in 5,160 towns and four million in 627,000 villages) HUL currently has the largest distribution reach amongst FMCG players and is planning to treble its rural distribution by reaching out directly to its consumers and distributors by increasing its direct rural outlet coverage to 750,000 from 250,000 by 2012. For the most part, these channels are the ubiquitous small kirana or mom and pop stores employing fewer than four people and selling a narrow range of products. Customers value these outlets because of their convenient location within walking distance of home or work, free home delivery, familiarity, and the provision of credit. In recent years, with economic liberalization, private firms such as Big Bazaar, Subhiksha, Reliance Fresh and Vishal Mega Mart, all employing western style retailing formats have entered urban markets in a major way. Of late, the rate of growth of western style retailing outlets has accelerated with the Indian government paving the way for foreign direct investment in shopping malls and warehouses

Distribution in FMCG can be divided into two types: Distribution in Urban Distribution In Rural

Distribution in Urban:

Flow Chart: a) Urban Retailers: Archetype A in Figure 2 is the most common channel structure in urban and semi-urban markets. The products in this industry are transported from manufacturing units to Carrying & Forwarding Agents CFAs charge a small fee to firms and dispatch products to distributors who further sell the same to wholesalers or stockiest who finally sell it to the numerous retail or neighnorhood Kirana Stores which serves the END CONSUMERS.

The products have to essentially be available in the market at all given points of time Most large Indian FMCG firms are organized around profit centers comprising groups of brands belonging to related product lines. Sales teams dedicated to individual profit centers call on wholesalers and carry out important channel functions such as negotiating terms of trade, fulfilling demand, obtaining customer feedback, etc

b)MTO: In recent years the advent of Modern Retailing formats and chain stores has led to variation. In this channel as depicted in archetype A1 of Figure 2. The advent of modern retailing in urban and semi urban areas has significantly altered the marketing approaches of FMCG firms.

c) Semi-Urban Retailers: Consider first the characteristics of archetype A2. Here, FMCG firms assess demand in low per capita markets adjacent to urban areas and develop optimal routing schedules and journey plans for urban retail stockists. Since the

overall demand is not very high, urban stockists visit these adjacent markets relatively infrequently and supply products to retailers.

Roles of Intermediariesa) C&FA : responsible for Warehousing, Billing, Transportation goods for the company. CFAs are typical channel members since they do not take title to goods and are not customers of the firm. They are just an agent b) Distributor/Stockist: The stockists are responsible to distribute to the retailers. Each stockist may serve around 500-1000 retailers in a proximity. Also, all the stockists are not the same in their storage. Every stockist may have his own set of categories which he can store the best, like a stockist can store rice, sugar, teapowder, biscuits, and snacks. Some may be specialists in handling premium products, and some in frozen foods. The company generally categorizes the stockists based on their specialty and allocates different super-stockists. For example, HUL categorizes them as U1 and U2 stockists, where U1 is general products and U2 stockists handle only premium products. The distribution network for premium products is different from that of discount and popular as they require much deeper distribution penetration unlike the premium products

The link between the manufacturer and the stockist is maintained by the manufacturers employees Area Sales Manager, Territory Sales Manager, Activation Manager, and the Re-Stockist Salesman (RSSM) and sometimes push the stock onto the distributor to meet their sales targets.

c) Retailers: They retail/stock, display & sell the products to end user or consumers. So, the retailers either buy from the distributor or they buy from the local wholesaler. Each has its own advantages and disadvantages. Distributor provides you with better servicing, replacement of spoilt products, credit facility of 2 weeks, etc.

On the other hand, the wholesaler will give you more margins, but no credit facilities and you dont have compulsion of storing a set of SKUs, etc.

Though each company has its own distribution strategy and flow, some of the intermediary might be eliminated most of the companies follow the above distribution framework.

2) Distribution in Rural: FMCG firms typically appoint rural wholesalers who are in close proximity to these markets. These wholesalers solve the last mile problem by contracting with individuals who carry products using local means of transport such as motorcycles, three wheelers, bicycles, bullock carts, etc. and deliver them to distributors in nearby villages.

Role of Rural: Super Stockist Provide desired infrastructure for distribution Investment in business as per company norms Distribute the products to the Sub Stockists who intern service the retailer in their respective markets Deliver and meet company targets / objectives

Also, some companies like HUL, ITC have introduced new projects to increase availability and awareness in rural. Company--local NGO--village level entrepreneur--consumer

Urban & Rural Stockists / RD : Urban Super Stockists / Sub Stk : Rural

Some Other Forms Multilevel Marketing: Followed by companies like Amway, Avon Cosmetics. This starts with a few but eventually becomes a huge network.

Multi-Level / Network Marketing

Canteen stores dept- They are special kinds of retailers owned by Govt of India Enterprises and are meant specially for DEFENCE PERSONNEL only. Distribution network and requirements of these stores are a bit different from conventional retailers.

Marketers are free to use more than one channel, they can use multiple forms of channels This is called Dual Distribution or Hybrid Distribution For example, Coke is available in stores, movie theaters, video rentals and through vending machines

Distribution in Advance Countries:

Unlike India, organized sector makes the major chunk of Retail Industry. Organised Retail in US accounts for 22% of the GDP. The United States is home to a number of leading brands in global FMCG retail industry like Wal-Mart etc.

Flow Chart: Manufacture -> Distributor/Warehouse -> Stores Distibution in advanced countries mainly can be classified into three parts: 1) Direct Distribution: In this type, Industries deliver products from the plants/
warehouse directly to the retailers commonly known as Power Retailers. These happens mainly with the Modern Trade Outlets which plays major role in US and is so huge that contributes 22% of the GDP. Eg Walmart, Carrefour, 7-Eleven etc

2) Indirect Distribution- Generally one intermediary is present. Distributors receive the goods from the companies, stores it and transports it to the Retail Stores from where it reaches end consumers. Its because of this very less Intermediary that the distribution in advanced countries is highly efficient and adds little to the cost. This is possible in advanced countries only because of: i) Highly developed Infrastructure and connectivity. ii) Almost uniform market. No fragmented market like that of India.

3) Online sales i.e. Ecommerce- Direct to the End Consumers:

Following are US centric stats as reported by ListenLogic: Percentage of online shoppers purchased personal care or food items online is 49% and 40% respectively. With the advent of smart phones, credit cards and wide internet access combined with less time available with the consumers has led to the increase in Online Sales. Here, consumers select items online which are then delivered to their places.

Challenges: The Indian market has been a great labyrinth for the marketers with unparalleled diversity in terms of consumer profiles and the distribution landscape. If we define markets as a cluster of more than one shop, there are more than 600 thousand markets in India. By the latest measures, 90% of these markets are fragmented into small retail outlets more popularly known as mom & pop stores. Historically, the challenge for FMCG companies has been to reach out to the consumers in such a fragmented channel-scape profitably. Some of the issues in building reach have been:

i. Infrastructure: Almost three fourths of Indias population or approximately 700 million people live in rural areas, which lack basic infrastructure such as roads, transportation. Given the lack of roads and viable means of transportation, FMCG firms had to navigate through a maze of fragmented, long, and inefficient channels for gaining access to rural markets. FMCG products find their way through boats in some markets of Kerala and through bicycles in many other markets of North and East India. In such a scenario, planning and optimizing cost of distribution becomes a huge challenge. ii. Size of market: Sparse population density in Indias interior, compounded by infrastructure issues of rural villages, has prohibited commercial players from enjoying economies of scale. For a bicycle riding salesman to prove cost-effective is not possible. There are many places in Indian hinterland where the size of market is too small to execute any project.

iii. Lack of uniformity: With the kind of consumer profile we have in India, it is not unusual to see the demand highly variable demand. The demand cycles might also not be uniform depending on the income cycles which vary considerably from one place to the other in India. iv. Local players: To add to the fragmentation of the retail, there also are a number of small local players throughout India who cater to the low-price segments generally and erodes the market through cheap and substandard quality products. Duplication is also another major challenge. The scale of their operations favored their strategy but created roadblocks for organized FMCG companies.

v. Low brand awareness: This was a traditional bone of contention because of the lack of the reach of mass-media vehicles to many parts of India. The marketing costs were very high and literacy rates were very low, a large chunk of consumers had very limited brand awareness. While it helped local brands, it also helped duplication and forged logos by many grey market players. The propagation of such products also made the distribution more challenging. vi. Unnecessary large number of warehouses- Companies make multiple w/h to avoid tax as if it has only one warehouse itll have to pay tax every time its product move from one state to another. So companies have W/H in many states which leads to unnecessary distribution cost and inefficiency.

vii. Poor Forecasting and demand Planning leads to change in plans weekly or sometimes on daily basis viii. Corruption ix. Frequent regulatory changes affect channel structure and exacerbate adaptation challenges. For example, in 2006 the government allowed direct foreign entry by single brand retailer. The whole distribution network changes. X Geographical Challenges: Extreme weather conditions, long distances (geographical spread), and hostile terrain present unique transportation and storage requirements, which require a high degree of customization both in planning and in execution of product distribution to rural

In a market where goods have a limited shelf life and perishables last only a matter of days, its essential that stock movements are timely and accurately tracker Cost efficiency
Best practices in the advanced nations:

1) Cross Docking: Warehouse are used only as co-ordination point i.e bulk orders are received from the plant and are co-ordinated according to separate stores demand and dispatched. At the end of the day inventory is zero. This not only leads to efficient but also Responsive Supply Chain. 2) Ecommerce- Distribution directly to the place of end consumers. Consumers orders required FMCG products online and itys delivered to their home from the nearby stores. This drastically saves time if the consumers and increases consumer Experience. 3) Daily Plannning: Inventory is minimized at stores and distribution is done on the daily planning basis which considerably reduces Inventory Costs.

4) ERP implementation for effective Distribution ERP Software is deployed

successfully which gives better control to the management.

ERP gives accurate details of the stocks and sales. In advanced countries the moment bar code reader reads the product, the information gets sent to the company and they exactly know the sales and stocks. Since, organized players play major role in advanced countries, its comparatively easier to implement ERP. 5) Long term close relations with distributors and retailers: This leads to the sustainable growth in the long term. 6) Transshipment - Transhipment is the shipment of goods to an intermediate destination, and
then from there to yet another destination. Sometimes it is cheaper to send goods directly to the intermediate warehouse rather than directly to the final. This is known as Transsipment.

Innovation in Distribution in Advanced countries: 1) Milk Run System- Rather then sending trucks to all the suppliers and stores. An Empty Truck is sent to all the suppliers which after getting fully loaded goes to stores and one by one deliver the orders. Inventory Carrying Cost as well as Transportation Cost goes down substantially. But it can be done only when suppliers are locally available. 2) Proctle & Gamble Continuous Replenishment Programme in USA- Working with number of retailers notably Wal-Mart, P&G developed widely recognized three way supply chain improvement system termed as CRP. Dedicated carriers with prescheduled appointments are designed to move replenishment stocks to Customer Distribution centres. Which alng with on hand inventory is sent to individual stores. Inventory level is kept minimum.
This embraces two main initiatives - Co-Managed Inventory (CMI) and Vendor Managed inventory (VMI), depending on which party, supplier or buyer, actually manages the inventory and on the extent to which information gets shared. The advantages of CRP are to: Increase inventory turns P&G inventory reduced from 19 days to 6 days Decrease stockouts Improve customer service levels Boost warehouse efficiency

 Decrease in distribution cost

3) Bar code reader in the Mobile: Its recently the most successful innovation in distribution and shopping. While waiting in the railway station or bus stand consumers can directly scan the bar code below the product image by the Mobile Application. This order is sent to the nearby stores which delivers the FMCG goods directly at the consumers place. This has reduced the necessity of consumers to get some time to visit the stores.
Its a big innovation and its users are rapidly increasing.

Although there are considerable challenges, some FMCG firms have developed creative product and package designs to penetrate rural markets. For example, Unilever has pioneered the development of low priced packets (LPPs) for a variety of FMCG goods such as shampoos, detergent, tea, etc. which retail for a rupee or two.

Unilever has launched a BOP marketing initiative called Project Shakti Essentially, the company works with non-governmental organizations (NGOs) to identify individuals who possess a strong entrepreneurial drive Unilever ensures that these entrepreneurs have access to credit, are trained in appropriate selling techniques, and can develop

into economically responsible individuals. Entrepreneurs are required to carry inventory and although they are free to sell products to rural retailers, the main focus is on selling products to fellow villagers. Since the projects inception, about 12,000 women entrepreneurs have been appointed and the company has penetrated about 50,000 rural village ITC, a major FMCG producer has successfully introduced an innovative supply chain initiative called eChoupal designed to benefit small farmers By using the Internet, the company created a transparent pricing system by providing farmers with real time information about world commodity prices and fluctuations

How can be improved: The Indian Postal System which operates in excess of 150, 000 offices has an unrivalled presence in rural areas. The system has grown by relying on private entrepreneurs who offer a range of postal services from their own premises in return for an allowance. In addition to delivering mail, today this channel is being strategically used by private firms such as ICICIPrudential for selling life insurance policies and mutual funds. In rural areas, the postal channel works bi-directionally in delivering mail and accepting deposits for insurance and mutual funds. Such synergies may also be creatively exploited by FMCG firms, which can market LPPs though these channels.

-----------------------------------------------------------------------------------------------------------------------Smell in coffee, Sachets Customer experience (CX) is the sum of all experiences a customer has with a supplier of goods or services, over the duration of their relationship with that supplier. From awareness, discovery, attraction, interaction, purchase, use, cultivation and advocacy. It can also be used to mean an individual experience over one transaction; the distinction is usually clear in context. Its a complex process of understanding your organizations relationship with your customers. When addressed effectively, customer experience eases customer acquisition, drives customer loyalty and improves customer retention. n short, customer experience meaning a customer journey which makes the customer feel happy, satisfy, justify, with a sense of being respected, served and cared, according to his/her expectation or standard, start from first contact and through the whole relationship. A company's ability to deliver an experience that sets it apart in the eyes of its customers serves to increase their spend with the company and, optimally, inspire loyalty to its brand. Bar code reader.r

Research by Shashank Kumar PGDM (2010) student at IIM Calcutta The Journal of Global Business Issues Volume 2 Issue 2 Article by Mr. Debi P. Mishra IIT Madras research paper www.Ibef.org http://www.beemanagement.com/pdf/2005/pn3.pdf research done by Bee Management Consultancy Pvt. Ltd.