Let us take for example an organization that is marketing 2 types of soap fresh

Let us take for example an organization that is

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Let us take for example an organization that is marketing 2 types of soap 'fresh' and ‘clean'. Each variety is sold in 100gms and 150gms size. It also sells 2 types of shampoo 'dark hair' and 'glossy hair'. These are again sold in 120ml and 200 ml bottles. Now one SKU (Stock keeping unit) is Fresh 100 gm. Similarly Fresh 150 gm is an SKU. Like wise Glossy hair 200 ml is an SKU and so on. For the study we shall contain our exercise to the company’s West zone operations. Let’s presume the company has a Zonal office at Mumbai. It has branches in Mumbai, Nagpur, Ahmedabad and Bhopal. If under each branch there are 2 areas (each area managed by an area manager) and in each area there are 3 sales supervisors with independent territories, and in each territory there are 4 salesmen, the organisation structure would look like: 123
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BUDGETS Fig. no.: 8.1 When the budgeting for sales quantity has to be done, it has to start from the lowest level.example, Glossy hair 200 for sales men 1, 2, 3 and 4 ——— cumulating to sales supervisor 1 of ASM 1 of Mumbai branch. The same exercise will be repeated for each SKU for each level and when they are aggregated they will cumulate to the sales plan for that SKU for W Zone. 124
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BUDGETS This exercise can also give us the sales plan at different levels of the hierarchy viz., at sales man level, at sales supervisor level, at area Sales manager level, at the Branch level and finally at the Zonal level. This planned sale is the starting point of any marketing/sales budget. The approach to this sales plan can be either starting from the grass root level (belief being that the salesman at the lowest point of the hierarchy are best suited to sense the pulse of the market and capture it in their estimate) and build bottom upwards. The other method is for the top people to estimate the sales plan (belief being that since they are more aware of the macro economic scene – 'the big picture' – they are better equipped to estimate the trend. This belief is also coupled with a feeling that salesmen instinctively may predict or inform a lower target – their variable earnings being linked with achievements, it makes sense for them to hide a bit – so that they can come out with better achievements) and then sell or impose down the line. Both being extreme views, many companies resort to a combination of both these method viz. taking estimates from grass roots, deliberating and modifying with macro inputs and then discussing with lower levels and convincing them to a consensus figure. This also ensures ownership for the targets and can lead to better motivation across the levels. The Sales target figure serves as the starting point of the following plans: 1. Production plan, 2. Procurement plan, 3. Dispatching and transportation plans.
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