Distribution channel and Channel Management
CEAT Ltd., one of the oldest among RPG companies, is one of India’s leading tyre manufacturers. It manufactures tyres for the Heavy Duty Trucks & Buses, Light Commercial Vehicles, Earth Movers, Forklifts, Tractors, Trailers, Cars, Two & Three Wheelers and Off the road segments. It also exports tyres to over 90 countries. CEAT has two large tyre plants based in Mumbai (Bhandup) and Nasik(Satpur), a tyre plant in Cochin, in Kerala, through RADO Tyres, and two plants in CKITL and ACPL in Sri Lanka, through CEAT Kelani. 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 “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, 2&3 wheeler segments. Also “Truck tyres” is the largest customer segment for any tyre company accounting for more than 50% of the tyre sales. CHANNEL DESIGN
CEAT has one of the largest distribution network for tyres in India. It has divided the Indian sub continent into 33 regions and has set up a Regional Office for each region. Clearing and forwarding agents (C&FAs) are attached to them. Often the largers regions have 2 or 3 or more C&FA’s to cover the region properly. The total number of C&FA’s across the country is 112.
The basic operating structure of the Ceat Ltd comprises of the following entities: _ Factory
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...