Markteting Distribution Channel of Ceat Tyres free essay sample

Tyre Production aggregates over 7. 6 million tyres per annum. Ceat produces Tyres for 3 different markets 1. OEM 2. Replacement tyres and 3. Exports. For the purpose of this project we are limiting ourselves to studying the distribution of the â€Å"Replacement tyres† market only. The reason is that tyres are sold to OEM’s follow the B2B sales process hence they do not require an elaborate distribution network. Also tyres that are exported use the distribution network of some other company. Hence the most challenging Sales and Distribution network is developed for the Replacement Market. The analytical Framework detailing how the variables affect Sales and Distribution of tyres has been developed for Truck Tyres. The reason being that, buying behavior is different across the Truck, Bus, Passenger Vehicle, 23 wheeler segments. Also â€Å"Truck tyres† is the largest customer segment for any tyre company accounting for more than 50% of the tyre sales. Clearing and forwarding agents (CFAs) are attached to them. We will write a custom essay sample on Markteting Distribution Channel of Ceat Tyres or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Often the largers regions have 2 or 3 or more CFA’s to cover the region properly. The total number of CFA’s across the country is 112. The basic operating structure of the Ceat Ltd comprises of the following entities: _ Factory _ DDC _ RDC _ CFA _ Dealers CEAT has three level distribution structure. The factory supplies goods to the RDCs (Regional Distribution Centers) and from these RDCs the goods are transferred to CFAs (Carrying and Forwarding Agents) which act as godowns for distribution to the dealers. There is only one DDC (Divisional Distribution Centre) this is at Nashik and is used for Storage and Assembly of tyres, Tubes and Flaps from the Nashik plant. RDCs are the mother godowns for storage of goods. The tyres, tubes and flaps are transported to these from factories. The set is formed at RDCs and strapped. The tube is inflated before transportation to RDCs. The Dispatch challans are issued to the transporters. In some cases, the RDCs are required to supply the goods directly to the dealers and invoice them in the required format. Ceat has recently shifted from the DDC structure wherein it had 7 DDC’s to the RDC structure, however this structure is proving inefficient from the operating cost point of view. The inventory cost has shot up and availability has suffered. The amount of safety stock in the system has also gone up. Hence Ceat is about to shift back to the DDC structure over a one year period. CFAs are the smaller godowns which pull the goods from the RDCs. They transfer the goods to the dealers and an invoice needs to be generated. The CFAs pull the goods from RDCs according to demand. These CFAs then distribute the goods to the dealers. The Dealers are of three types 1. Tyre retailers: These are usually multi-brand tyre dealers. They stock many brands of tyres for a particular segment of customers. These can further be divided into Truck Dealers and Non-Truck dealers. 2. Trader Dealers: These dealers are used typically to ensure upcountry coverage where the company distribution network is absent. These dealers have their shops in upcountry locations or sell to other dealers in upcountry locations and thus enhance the distribution reach of the company. They purchase tyres in bulk and often avail of the Turn over discounts. 3. Ceat Shoppe: Ceat shoppe is a retail outlet where only ceat tyres are sold. This is used mainly for passenger car and 2 wheeler tyre sales. The customers get a range of tyres and advise about selecting the right tyre while purchasing from here. They also get a very good after sales service. The region under each regional office is divided into sales territories that are handled by the territory leaders. The Sales in the region are headed by the Regional Manager. The territory leader caters to all the tyre dealers present in his sales territory. However in the Mumbai Regional Office no territories have been given and TL’s are allowed to go anywhere in Mumbai and develop their dealers. This is so because when the Mumbai RO was formed most of the dealers in the region were loyal to MRF and hence it was important to convert as many as possible. The responsibilities of the RO include: 1. Controlling administration of office. 2. Handling of day to day work like administration, cash, sales/stock operations/M IS legal formalities. 3. Reviews with sales field staff. 4. Review of commercial control. 5. Compiling of data received from the CFA. 6. Maintenance Reconciliation of stocks accounts. . To cover the upcountry sales, apart from the trader dealers, Ceat also has appointed area managers in important upcountry areas. Sales associates work under the area managers and are responsible for all the dealers in a given territory in the upcountry market. However the upcountry market is a challenge as the company does not have a CFA over there and availability is always an issue due to the remoteness of the region. The Territory leaders are given a travel plan which has been decided onsidering the best coverage and lowest cost and journey cycle. Attached below is a sample travel plan: Problems with existing structure: 1. The productivity of sales fleet is the lowest for CEAT ,it is primarily because the territories have been defined in the past which don’t cater to the needs of the present scenario 2. TL’s focus is on major towns and while traveling from one big town to o ther the smaller towns get neglected which affects the sales. 3. As major dealers are in big towns with higher market potential, cost cutting while selling tyres is done. Hence the employee cost/sales is high. In comparison MRF is already the market leader. MRF sets trends in the tyre industry and employees would like to work for MRF just for the brand name that the company has generated over the years in the Tyre industry. Hence the salaries at MRF are comparatively low. Hence the employee cost/sales is low. The selling expenses per unit sales for Ceat are about 0. 085 which is significantly higher than MRF. Even with respect to market spend per unit of sales, Ceat spends more than MRF. 1 This shows that MRF has a better brand pull than Ceat. Lower brand pull of Ceat results in the following: Ceat has to give higher margins to its dealers. Typically MRF gives 1% Turnover discount to the dealers while Ceat gives 2. 5% or more. Lower brand pull also translates into higher selling expenses for Ceat. The amount of BTL advertising required for Ceat is significantly higher. Also the number of promotions, demonstrations and service camps that Ceat has to conduct is significantly higher. MRF being an established brand has developed excellent relations with its dealers and customers over the years and hence does not require spending the same amount as Ceat.