Physical Distribution Management In Brewery Industries (A Case Study Of Nigerian Breweries Plc Enugu)

Project and Seminar Material for Marketing

Physical Distribution Management In Brewery Industries (A Case Study Of Nigerian Breweries Plc Enugu)


Abstract


If a company has a good product, well branded and priced, required and proper promotion done but could not get to the users as and when required, the company has succeeded in achieving nothing.

Therefore, the objective of this study is to ascertain whether the company has sufficient number of functional distributors, dependable source of raw materials and good distribution network.

Chapter one contained a general discussion on distribution. It went further to find out if the company have dependable source of raw materials and from the objectives of the study four hypothesis were formulated.

Literature review tried to examine both the empirical and non-empirical works available on the subject of the study.

Chapter three dealt with the design of the study. The methods of relevant data collection, distribution and treatment of data were also discussed.

The data collected from the survey were analyzed and interpreted in chapter four,

Finally, the summary of findings, conclusion and recommendations were contained in chapter five. It is the belief of the researcher that if Nigerian Brewery and other brewery industries would put the recommendation given in the study to use that there would be a drastic charge in the services offered and continuous increase of profitability on the side of the company.


Chapter One


Introduction

1.1 Background of the Study

Production is the creation of goods and services, the goods and services can be produced in factories, industries, firms or companies. Production is not complete until the products / services get to end user or consumer. This can be obtained through the distribution process and that complete the production cycle. The distribution activity is equally referred to as physical distribution management (PDM), Marketing logistics and material management. Physical distribution system includes; transportation, material handling, order processing, inventory control, warehousing and packing into a complete distribution strategy.

Mccarthy, described the place component of marketing mix (distribution) as “the situation and use of marketing specialist middlemen, transportation and storage agencies to provide target customers with place and possession utilities. Distribution channel is regarded as a bridge that spans various gaps between producers and customers.

Kolter on his own stated that physical distribution is defined as the planning, implementing and controlling the physical flows of materials and final goods from point of origin to point of use to meet customers needs at a profit. It is concerned with the efficient movement of raw materials, from the suppliers to the factory site where they are processed into finished product and passed to the final consumers.

The procedure of getting the right quantity of the right product to the right place at the right time and at the least cost is no simple job because companies like the brewery industries with their great diversity of customers spread over vast geographical areas must integrate the systems components to avoid dissonance. (dissatisfaction). As stated earlier, there exist a gap in the firm of place and time between manufacturer and the ultimate consumer or user for whom the manufacturer is producing, and this gap can only be bridged by distribution.

Many problems are confronting the distribution system of brewery industries, these problems ranges from lack of channel members, to physical distribution problems such as lack of adequate transportations, poor inventory management, inadequate warehousing facilities and lack of sophiolicated method of communication. The problem in distribution network starts with selection of mode of distribution, selection of inexperienced personnel’s with little or no business acumen as distributions. The continuous increase in the cost of transportation due to decoration of our roads, high cost of vehicles and spare parts and currently increase in cost of petroleum products poses a serious problem in the effective coverage of territories in the distribution of bear both in rural and urban areas in the country.

In the area of inventory, modern management is rarely practiced; this is partly caused by insufficient storage facilities and inappropriate storage methods which invariably results to high rate of spoilage, breakage and waste of products. Besides, warehouses are very few and far, sophisticated material handling equipments like fork lift, cranes, conveyor machines etc are lacking in some of these companies.

So in the light of these marginal of problems and the fact that there are so many brands of bear in the market from which the consumer has to choose with little or no difference among them in terms of quality and other characteristics. It then follows that there is a need for the individual brewing firms to manage the physical distribution system and engage in proper manipulation of other marketing mix variables in order to keep afloat in the present day competitive beer market in Nigeria.

In this study, the researcher shall consider the physical distribution management from the point of view of NIGERIAN BREWERIES PLC, NINTH MILE, ENUGU, ENUGU STATE.


1.2 Statement of the Problem

There is a common problems in the brewery industries, (Nigeria brewery Plc inclusive) which hampers the effective and efficient movement of their products from point of production to the final consumers, this is the problem of physical distribution which if not attended to may be a bailer to a company’s effort to satisfy its customers as well as meeting its marketing goals and objectives.

A well modeled distribution channel is basically a prerequisite for proper integration of the activities that will eventually lead to attainment of the organizational goal. When the consumers are not well linked through an organizational distribution channel, the problem of where, when and at what price the company’s products will be available will be difficult to ascertain.

The price of products of the Nigerian breweries plc trench to be higher in towns far from the location of the plant and it is also known that the warehouse in the plants location are often overstocked whereas the product experiences sporadic shortages.

The problems to be addressed includes;

  1. Do Nigerian Breweries Plc have warehouse outside their plants location.
  2. Do they have sufficient number of functional distribution vans or trucks?
  3. Do Nigerian Breweries have dependable source of raw materials.

1.3 Profile of Nigerian Breweries Plc

Nigerian Breweries is a public limited liability company with registered head officer in Lagos. The company is owned by Nigerians and minimum representation of foreign interests.

Nigerian Breweries limited as it was then called was established in November 1946 for the main purpose of brewing. It is the first brewing firm to be set up in the country. In 1949 the company started operations in Lagos with single product line ‘star larger beer”. But today, it has brewing plants in Aba, Kaduna, Ibadan and Enugu with a wider verities of product which includes Gulder, Maltina, Legend extra stout, Amstel etc.

The Enugu plant was bought over from monarch breweries limted on September 1992 and is sited at 9th mile in Ngwo. Recently, the company had a new site at the same venue just some poles from the former plant. The new site went into full operation in 2003 and was built to international standard.

Today, Nigerian Breweries Plc is one of the leading name in the financial market. The new site is where production takes place while the former site is where the warehouse is located.


1.4 Research Objectives

The primary needs for the study are;

  1. To find out if the Nigerian Brewery Plc have warehouses outside their plant location.
  2. To ascertain whether the company has sufficient number of functional distribution vans.
  3. To determine if the company have dependable source of raw materials.
  4. To proffer recommendations that are in line with the researchers objectives.

1.5 Formulation of Hypothesis

  1. HO1: The company has warehouses outside their plant location
  2. HO2: They have sufficient number of distribution van
  3. HO3: The company has dependable source of raw materials.
  4. HO4: The physical distribution management of the company is effective.

1.6 Significance of the Study

The study of channels of distribution of Brewery industries and its associated problems would be of benefits to brewery industries and Nigerian brewery Plc in particular.

This research is aimed at finding the suitable situation that will guide the members of the industries in designing effective and efficient channels of distribution to effectively reach the target consumers. The research is also aimed at providing Nigerian Breweries plc management with important and identified variables that are necessary to the development of good channels.

The alarming rate of physical distribution cost in the brewery industries made this study more significant as the researcher tends to determine the possible way of reducing the cost and providing effective and efficient solution to the problem of physical distribution management.

The coordination of the activities of physical distribution are indispensable to any firm that is engaged in production of goods or services because distribution is a course that must be managed effectively and efficiently to control an organizational system. The significance of this study is more apparent and appreciated when we understand the importance of physical distribution in the brewery industries like Nigerian Breweries. Moreover, in the brewery industries, distribution cost is the Killer cost or the Killer disease variable cost. Since profit is the goal of every busies, this important variable cost has to be intensively managed in order not to eat deep into the company operation cost. Marketing managers and the management in general must give high level of attention to physical distribution because its cost alone can detrimental to the entire organization.


1.7 Scope of the Study

The scope of this study is very wide if the researcher is to cover all the geographical areas where the Nigerian Breweries have establishment, distributors and outlets. This study is therefore limited to (Enugu Urban and some towns near Enugu) and the findings not reflect he situation in other towns of the state not included in the research and other Nigerian Brewery plants in other states of the country. But by and large what happened in Enugu urban and its environs can be said to apply to other states and locations.

The researcher has limited the study to areas mentioned above base on time constraints, financial constraints and limited materials resources at his disposal.


1.8 Definition of Terms

The following terms used in this study should be taken to mean the following.

Physical Distribution Channel

The movement of goods from the point of production to point of consumption.

Logistics

This implies to the procurement of souring of raw material to the production unit, movement of the finished goods to the warehouse then to the distribution intermediaries before the final consumers.

Efficient And Effective

This means being able to achieve a company’s goals and objective as at when required at the minimum expenses.

Channel Strategy

This is the adoption of an appropriate means of distribution that will serve efficiently and effectively from the available distribution options.


Chapter Five


Summary, Conclusion and Recommendation

5.1 Summary of Findings

This study was conducted through the scientific method procedure of research. The relevant data collected through diverse method such as the use of questionnaires, interviews and observations were analyzed to study the physical distribution channel management of Nigerian Breweries plc products in Enugu metropolis.

The researcher was able to gain insight into the strength and weaknesses of the distribution activities and proper recommendations were made to connect the weakness and as well to enhance distribution. The following are the findings from the study.

The present distribution system of the company is not satisfactory, the activities have been fragmented and economies of scale from channel co-operation have not yet been achieved. These have affected enviously the execution of channel wide policies. Moreover, the undefined or inefficient allocation of functions in the channel has played the channel management. Based on this it is the wish of the distributors/dealers of NB Plc that the present distribution system be improved or reconstituted as soon as possible.

Also the company has no good communication system for effective co-ordination of logistic activities which undoubtedly has resulted to unaware of the availability of NB products in some places.

Moreover, the company’s vehicles are not sufficient for prompt delivery of its products to their various outlets. Though from the data collected the company has a number of vehicles but are not good enough since the company has vanities of drinks which are needed in the market.

More so, it was observed that due to the inefficient distribution of the company’s product the syndrome of out of stock is noticed in some locations which results to like in are price of the products.

Finally, the company has only one warehouse for the storage of their products which is not good enough. This has resulted to unavailability of the product during rush hour or during promotion as distributors requirements are hardly met.


5.2 Conclusion

Distribution one of the 4ps has been described as the second half of marketing because of the important role it plays in a firms marketing effort, it has to do with the channels through which goods and services flow from the producers to the consumers and in the procurement of the raw material and all activities involved in such flow.

Business organizations are established with primary aim of survival through growth occasioned by profit in their enterprise. The desire to achieve this profit motive spares organizations to ensure that they are packaged in attractive parks that could appeal to the consumer and reached the consumers in the right time and place.

A company has to organize and co-ordinate its distribution system in such a way that its objective can be achieved. Many firms sources for raw materials, move them to the company effectively, manufacture or produce high quality products but are not sold because of negligence, towards the importance of the final distribution process in their making effort. Some in vis-vasa neglet the procuring of raw materials and warehouses and attaches interest in disposing their produced product to consumers.

Quite often, physical distribution problems develop from failure to adequately integrate the purchasing, manufacturing, distribution and marketing control system. If the function of distribution is not properly performed, the goods will not be provided where an when they are needed. A well packaged, priced product with high quality that could not reach the people for whom it was produced is as good as not being produced. In the light of this, the researcher has attempted to identify some of the problems that work against the efficient and effective distribution of NB products in Enugu metropolis.

The findings as discussed earlier revealed that poor fragmentation of the channels, undefined and inefficient allocation of functions in the channels and poor communication system are some of the problems hindering the effective distribution of NB products.

Recommendations were therefore made to help in solving these problems.


5.3 Recommendations

The result of the findings shows that NB Plc has problems with its physical distribution system. The following recommendations were made:

  1. Based on the findings the NB Plc should improve or charge the present distribution system.
  2. More attention should be given to purchasing and distribution department for the efficient and effective distribution and procure of materials.
  3. The company should ensure that every appointed distributor meets the laid down conditions for appointment. Also this distributors should be appraised quarterly or yearly to ensure compliance with the rules of the game.
  4. A more capable and qualified hand should be appointed to manage and control the purchasing and supplying unit.
  5. An annual performance evaluation should be conducted as this will help them to sit up, penalties should equally be made in black and white for poor performance both for the company workers and distributors.
  6. A good communication system is needed for effective coordination of inventory, warehousing and distribution. An effective communication system requires that the present stock levels at the warehouse should be known for future commitments of supply to customer and sources of inventory replenishment should also be known.
  7. Conclusively, for effective distribution of NB Plc products, the company should acquire more warehouses to compliment the already existing ones and as well purchase more vehicle to fortify the effort of the exiting ones.

It is the belief of the researcher that if the recommendations suggested above are implemented by Nigerian Breweries Plc that it will go a long way in enhancing the effective and efficient physical distribution management.


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