The impact of distribution on the sale volume of soft drinks industry

CHAPTER ONE

INTRODUCTION

1.1 Background of The Study

Distribution channel is the path through which goods and services traverse as they go from producer to ultimate consumer. Also, marketing channels or marketing intermediaries represent organized network of agencies and institutions which incombination perform all the activities required to link producers with users and users with producers in order to accomplish the marketing task. By delivering products and their ownership titles to consumers at the right time, marketing channels therefore, perform a special kind of service to society by generating time, place and ownership utilities.

A sound physical distribution policy are therefore, important as a guideline for companies effective and efficient performance in order to realize and achieve the desired short and long run goals and objectives.

Many business organizations have come short of achieving their desired goals and objectives even after producing high quality products. These shortcomings have been attributed to improper, ineffective and inefficient strategies as it relates to physical distribution of goods. The purpose of distribution is to make goods to be physically available to the ultimate consumer at reasonable prices. It is therefore, very imperative that the products are distributed in the most efficient manner to reach the ultimate consumer whose patronage ensures the survival of the organization. By so doing, the organization will enjoy consistent high sales turnover and subsequently high profit delivery.

Organizations through their managerial functions of planning, marshal out articulated ‘policies that enable them to control their internal and external actions. Against this background, the organization will be able to harness and monitor her relationship or activities internally and her publics.

Physical distribution policies In the Nigerian Bottling Company include’ identification of appropriate location of plant, equipment, depots, warehouses and mode of transportation services. It also includes the maintenance of good communication system, inventory level and proper packaging of products so that they can be transported and stored on a economic basis. They are geared to reduce loss and increase satisfactory customers service so that the organization will continue to win their loyalty.

1.2Statementof Problems

An efficient physical distribution system makes it possible for a particular geographical area to specialize in producing products for which it has the appropriate natural resources, ultimate or to the advantage.

However, physical distribution policies of most product- oriented companies in Nigeria have left -much to be desired in satisfying-the consumers wants and needs.

This project work will endeavour to appraise the physical distribution policies of Nigerian Bottling Company organization in Enugu, and proffer solutions for improvement.

1.3 Statement of Objectives

Efficiency and satisfactory services are key goals of physical distribution of the Nigerian Bottling Company. Organizations whose physical distributions policies are far from adequate in meeting her key goals should appraise these policies so as to correct the lapsesand flaws where they exist.

Additionally, this research work apart from appraisal of physical distribution of Nigerian Bottling Company Plc, intends to now the following:

  1. To examine whether the physical distribution policies of the company are being implemented along the line of set

objectives.

  1. To ascertain the extent the various strategies have helped to enhance the company’s physical distribution proble
  2. To determine to what extent the sales department

especially, has gone in coping with short of delivery trucks, vehicles etc.

  1. To proffer or recommend articulated solutions to the bottlenecks being experienced by the Nigerian Bottling Company Plc, in the physical distribution of her productions within Enugu.

1.4                   FORMULATION OF HYPOTHESES 

  1. Ho: The physical distribution policies of the Nigerian Bottling Company have not encouraged consumerloyalty of the company’s product.

 

Hi:             The physical distribution policies of the Nigerian Bottling Company have encouraged consumer loyalty of the company’s product.

  1. Ho:      The safes department programmes to satisfy both existing and prospective customers are not adequa

Hi: The sales department programmes to satisfy both existing and prospective customers areadequate.

  1. Ho:      The chosen channels of physical distribution have not affected the consumer patronage of the company’s products.

Hi:            The chosen channels of physical distribution have affected the consumer patronage of the company’s products.

1.5   SIGNIFICANCE OF THE STUDY

The research work is very significant because of it contributes to the field of knowledge, in finding ways of improving the physical distribution policies of Nigerian Bottling company in Enugu.

Additionally, the research work would appraise the significant role of physical distribution policies of the Nigerian Bottling Company Plc, in Enugu as to know whether it has been adequate to the company’s most target audience.

The findings and recommendations of this research work, if adopted by Nigerian Bottling CompanyPlc, in her physical distribution policies will reduce some costs and enhance her distribution activities above her competition.

Management of Soft Drinks Companies and the Nigerian Bottling Company plc, in particular can adopt these findings as a guide in formulating their physical distribution polices for their companies.

Academically, further research could be carried out to widen the intellectual horizon of people, and also, improve the physical distribution policies of the Nigerian Bottling Company Plc, and other Soft Drink Bottling Companies in Enugu and beyond.

1.6   SCOPE OF THE STUDY

The scope of this study IS only limited to the Enugu Metropolis as being covered by Nigerian Bottling Company. For ease of research project, Enugu metropolis was divided into four groups: ABC and D.

1.7   LIMITATION OF THE STUDY

In any human endeavour, there are always some constraints and this research work is not an exception.

  1. It was the intention of the researcher to cover other products but for the limited time given for the
  2. Closely related is the problems of inadequate fund to finance the research which limited the scope of research to only the Nigerian Bottling Company Plc in Enugu.
  3. Limited published data on the topic was equally a c In fact, much has not been written in this field in which case, the researcher wrote using other published material.
  4. Accessibility to some key officers for interview was nearly impossible as the secretary deliberately refused the researcher entry. Others claimed they were ‘not

authorized to expose official secrets,

 

1.8   THE NIGERIAN BOTTLING COMPANY PLC. ENUGU PLANT

Nigeria Bottling Company, Enugu has presently installed capacity of two hundred and fifty thousand hectoliter. The increase was necessitated by the daily Increase at the consumption rate of soft drink in Enugu metropolis ‘and other areas, which the plant serves. This increase in soft drink production has equally affected the volume of work being performed by the field officer, sales departments, production department and the contractors too. The creation of Ebonyi State has subsequently increased the allocation being provided for that area too.

As a result of this, they have redrawn their physical distribution network to enable them meet the prevailing challenges. Enugu plants have staff complement of 300 in administrative, production, purchasing, supply, distribution/ sales and operation. The Enugu plant supplies all other depots at

Nsukka, from these depots, it distributes the soft drinks to dealers who will eventually directly sell the soft drinks to ultimate customers.

Enugu plant presently has about 10 trucks which distribute  the soft drinks to the- depot. However, the plant having realized the insufficiency or inadequacies of these vehicles for effective physical distribution, has signed agreement with truck owners for commission. As a result of this, agreement, the vehicle owners have deployed their then to the distribution of soft drinks volume of their sales volume and also consignment reduction of their maintenance and service costs of their capital equipment.

Furthermore, Nigerian Bottling Company Plc in the quest to boost her sales volume in Enugu metropolis and widen the physical distribution polices has encouraged those with private  trucks, lorries and vehicle to obtain their quantities directly from the plant. This has reduced the long time being awaited before the retailers and wholesalers are served with the products. This has equally allowed the plant managers to serve sufficiently their depots for benefits of small buyers. Distribution outlets, like Universities of Nsukka, Enugu Campus, Enugu State University of Science and Technology,

Institute of Management and Technology Enugu , Ecumenical Institute Emene etc are stockpiled with different brands-coca- cola, Fanta orange, Fanta ginger ale, Fanta tonic; Fanta Chapman, sprite, lemon etc.  Nigerian Bottling Company has among her distribution

policies provide kiosks and stall for willing and interested retailers and traders whose energy will concentrate solely for the distribution of their products. This, they consider will ‘not give their competitors any room to’ breakthrough. Such beneficiaries are provided with fridge, freezers, coolers etc.

In view of the dispersal nature of the distributions and consumers in the metropolis the Nigerian Bottling Company depots mass/multiple distribution policies. With this design they are able to meet the needs and consumers. Selective and exclusive distribution physical policies are equally embodiment of the physical distribution policies of the company.  By this, the company is able to reach out or serve those customers who cannot be served through the intensive mass distribution. However, the company ensures that the selective and exclusive channels do not create monopoly among those involved.

Organization Distribution Policies and Logistics: 

The task of distribution is to make goods available to buyers. In doing so, exchange of ownership takes place in which case, title to a product has to change hands several times and physical movement of goods is triggered off but not necessarily to accompany the route of ownership flow.  The physical flow of distribution in Nigerian Bottling Company is essentially the responsibility of the sales department. In order worlds, the sales and transport departments are merged into a single department. The function of the sales department is to maintain links with distribution who in turn ensures that the channel network is efficient and effective. The sales department which co-ordinates the activities of the transport department take charge of the organization’s route trucks, built delivery lorries, trailers and hired vehicles and sees to the organization’s physical movement of the soft drinks (product) from the plant warehouses to the various target market destination in the Enugu metropolis.

There routine activities are not restricted to Enugu metropolis alone, it cuts across all other’ plant warehouses throughout other areas.

Nigerian Bottling Company has in her distribution policies as:

  1. Institutional distribution
  2. Physical distribution

Institutional Distribution: Involve the use of the institutional components or elements to facilitate ownership flow or transfer of title to a product from the first owner to the last owner in order to achieve the marketing goal in a manner profitable to the company. However, the achievement of the goal is in part dependent upon the nature of its marketing structure hence its significance.

The institutional structure for marketing consists of various elements which are physically identifiable, including producers, the ultimate consumers or users and the middlemen.

Physical Distribution: Is often referred to as logistics and tasks of logistics is to minimize non-transportation and transportation costs which usually arise as a result of physical movement

activities.

The organization believes so much in reaching out to her customers. As a result, the company ensures that the retailers and the wholesalers perform their duties efficiently and equally have good command of the market. Under marketing distribution policies we have:

  1. Mass/intensive/multiple distribution
  2. Selective distribution
  3. Exclusive distribution

Mass/Intensive/Multiple Distribution: 

According to the marketing manager on the, intensive distribution strategy, the company uses route trucks for delivery approved to their customers mainly in the bottling areas of the company in Enugu. This enhances the bottle turnover or bottle return after sales. The small hotel, kiosks, fast food joints and restaurants belong to this level of distribution.

Additionally, customers who are not big time soft. Drink dealers belong to this group.

Selective Distribution:

The Nigerian Bottling company here, selects among distributors who are credible, normally and financially, to distribute their products. The company delivers the products to the distributors who buy in large quantities and are also located at a strategic area where customers can easily locate them. Also, it reduces the cost of transportation for Nigerian Bottling Company.

Nigerian Bottling Company in her physical distribution policy, delivers her products to the distributors -with bulk delivery and thus varies from trailers and trucks.

Additionally, distributors collect their products from the company’s plant premises and this is known as self-collection method.

The company’s effort to in reaching the distributors with the company’s delivery van is that it helps the company to decongest her premises by avoiding excessive stock-in.

Exclusive Distribution

This is of little significance to the Nigerian Bottling Company in respect of Enugu metropolis. The reason is that other competitors will not be given the least opportunity to take control of the market; such competitors include 7up Bottling Company, Reno Soft Drink Company 9Lh Mile, Nigerian Mineral Waters, makers of Limca Soft Drinks.

The Distribution Policy and Enugu Distribution

The physical distribution policies of “Nigerian Bottling

Company are uniform in structure in all their plant locations. However, due to the peculiar characteristics surrounding some environments, some plants are therefore allowed to modify some specifications so as to oil easy and efficient distributive system. Other reasons could be as ‘a result of consumer behavior and tradition of the people.

According to the sales Manager, Aba and Enugu plant offices tend to have such similar strategy than other distributions plants

offices.

Due to these difference, distribution problems may arise. When the routes, avenues or pathways through which goods and services flow or move from producers to consumers are blocked, many things come to marketers mind. It is under this premise. That the Enugu distribution office modifies their distribution strategies in order to suit the environment in which they are operating.

In order to serve and respond to the demands and needs of the customers, the Enugu plant Office categorized the customers into groups:

  1. Exclusive: These are strategic public centers where the company’s products are assumed to be in constant and high demand. These include places like the Airport, Hotel Presidential, Modotel Hotel, Zodiac Hotel, Recreation Clubs and Nike Hotel Resorts.
  2. Middle Class: These are fairly large establishments but do command a lot of market patronage like the exclusive. Their sales volume are quite on the high side and they include big super markets like Eastern Shop, Tompson Super Markets, and Leventis Stores, Fast Food Joints and Restaurants equally belong to this categories.
  3. Other: There are those outlets that do not belong to the two mentioned categories. They constitute the kiosks, small hotels, restaurants, and stores, talk shops, hawkers and retailers.

The physical distribution policies of soft drink companies in

Nigeria requires special attention as a result of its nature. The issue is essentially one of determining any appropriate distribution pattern or methods that should be employed to minimize total cost of distribution and therefore beat down the incident or competition since, a lot of competitors have natured to

Share in its profit. Some competitors include Reno Industries, Nigeria Mineral Water, makers of Limca, 7 -up Bottling Company to mention but few.

Business concerns are established to make-profile or operate with break-even point. The profits earned are generated through the implementation of a sound policy. These companies which Nigerian Bottling Company belongs to operates within the ambit of such laid policies in their day-to-day operations. If a’ policy is not well formulated and implemented, it will adversely affect the organization which will eventually affect the consumers. ‘

On the basis of this, there is need for a careful handling of the physical distribution function to ensure a successful operation of soft drink industries.

However, for Nigerian Bottling Company, for· physical distribution policies to be purposeful, the policies must be constructive in their core activities such as transportation, warehousing, inventory management, order processing and also, have the ability to organize these mix activities properly.

This research work intends to examine and appraise the physical distribution “Direct” and institutional distribution or indirect policies of the Nigerian Bottling Company.

Additionally, we will appraise whether the policies have served the customers satisfactorily and if the policies have also contributed to the growth realization of the organizations goals and objectives or not, whether such policies’, ensure that the customers get the products at the right time and in the right quantity as ordered. Any shortcomings from these physical distribution policies.- will certainly lead to loss of customer’s loyalty to competitors, which will consequently affect the profit  position of the company.

Effects of Company’s Policies on the Company, the Consumer and The sales Volume: 

The problem of selecting the most satisfactory channel of distribution for production is complex. A lot of ‘things are thoroughly examined and appraised before the final selection is done in both the physical and institutional distribution. The company ensures that the uncontrollable external variables are properly appraised in order to reduce the inherent risks that are likely to occur. Such external considerations include:

  1. The nature of the- product
  2. The position of the manufacturer
  3. The position of the consumer
  4. Analysis of market consideration
  5. Type, location and buying habits of consumers
  6. Existing trade channels of competitors.

Absence of effective distribution may arise and also the increasing prices relative to the demand qualities for the company’s product calls for a re-examination of the physical distribution policies and the efficient handling of the company’s physical distribution programme.

Unfortunately, like many other firms in the related industry, the company’s physical network tends to be bedeviled with the following problems.

In the event of direct dealings with customers, there maybe conflict between the company and the sales force objectives. The sales force may want an increase in the commission paid by the company while the company may want to invest more in capital projects. This could lead to industrial disharmony, which will affect the performance of the sales force. Against this background, the customer will no longer be served properly.

In order to meet her target, the company will ensure that her staff, especially, those in the sales department are properly motivated. As a result of this, they will enthusiastically serve the customers to the best of their ability.

Additionally, the company should provide ‘sufficient vehicles to distribute the products to the ultimate consumers. Inadequacy of funds to procure more distributing vehicles and replace of broken down ones will surely affect the performance of the sales force and many customers will be unsatisfied with the services they received which is not in the best interest of the company.

In the same token, in dealing indirectly or institutional dealing with customers some operational cost, which would have been incurred in the form of transportation, will be saved. The fund which would be employed into other useful ventures in the form of transportation, will be saved. The level of satisfaction that consumers will derive by using the company’s salesmen might be more different than using distributors. When such problem exists, consumer patronage will be reduced thereby overstocking the warehouses of these distributors.

Another problem with indirect or institutional dealing with consumer is that since the chain of distribution is long some bottles might not be retained which is an additional cost to the company.

This research project is therefore aimed at reappraise thee policies so as to fine tune lapses where they exist. The inadequacies of marketing systems in the soft drink industry are most glaring in the ‘area. of physical distribution and – one frequently hears of problems affecting the development of such infrastructure needed by the industry; such glaring problems are in the basic support for modern marketing activities but they are poorly provided for. The lack of such infrastructure will adversely affect the industry. The management should look into such areas In order to enhance the performance of the industry at large.

The management should provide adequate personnel to man the warehouses and deports, so that customers orders and request will be promptly responded to. The fridges, deep freezers, coolers, T shit, openers and cup should be evenly and fairly distributed to sustain patronage.

 

REFERENCES

Ifezuea, AN. (1990): Basic Marketing; Enugu: ABIC Publishers Ltd

Kotler, P. (1980): Marketing Management, 2nd Edition; New York: McGraw hill Inc.

Udeagha, O.A. (1996):  Principles of Marketing)’ Enugu: Optimum Publishers ltd.

 

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