1. A Study on Physical Distribution
Activities of
Shwe Me Company Limited
Supervised by Presented by
Daw Swe Swe Oo Hla Wynn
Lecturer Roll No. 82
Department of Management Studies EMBA 8th Batch
Yangon Institute of Economics
1

2. Presentation Outline
Rationale of the Study
Objectives of the Study
Scope and Limitation of the Study
Research Methodology
Organization of the Paper
2

3. 1.1 Rationale of the Study
Myanmar is an industrial based agricultural country having natural resources
and places for the infrastructure development. For the country, it needs to supply the
construction materials for the construction sides, so it is essential for the supply side.
There are increasingly extended requirements for the construction to facilitate the
growing population.
Shwe Me Company Limited (SM) is one of the major cement and
construction materials importing and distributing companies, it provide construction
companies to raise the success and benefits of using its quality cements. The SM could
offer it products by enhancing a robust and superior quality of the building structures.
SM designated as a key importer of the Elephant brand cements, importing over 30,000
tons per month from Thailand by seaborne trade.
3

4. 1.2 Objectives of the Study
This paper is intended to present the importance of physical distribution in
delivering the products from end of production to the consumer.
The objectives of the study are as follows:
1)To examine distribution channel structure of Shwe Me in terms of factors of
choosing the right distributor
2)To analyze the physical distribution activities of Shwe Me in terms of transportation,
inventory, warehousing, materials handling, protective packaging and order processing
4

5. 1.3 Scope, Limitation and Method of the Study
This study describes current situations and findings on the physical
distribution activities of SM by analyzing its distribution channels over the country.
Due to time and cost constraint, the distribution channel structure of
competitors and their physical distribution activities cannot be observed.
This study applies descriptive research method. In preparing this paper, both
primary and secondary data are collected. Primary data are obtained from field survey
and personal interview with responsible personnel of SM. Secondary data are collected
from such related sources as brochures, pamphlets, reports prepared by SM as well as
from text books, internet, etc.
5

6. 1.4 Organization of the Paper
This paper is presented with five chapters. The first chapter displays brief
introduction of physical distribution and followed by rationale of the study, objectives
of the study, and scope, limitation and method of the study. The second chapter
includes the theoretical background of physical distribution. The third chapter is about
the profile of SM. The fourth chapter contains an analysis on physical distribution
activities of SM. In the last chapter, conclusion with findings and suggestions are
submitted.
6

7. Chapter II
Theoretical Background
This chapter describes the theoretical background of physical distribution
which is used to analyze the physical distribution activities of Shwe Me.
2.1 Definition of Physical Distribution7
Physical distribution is the set of activities concerned with efficient
movement of finished goods from the end of the production operation to the consumer.
Physical distribution takes place within numerous wholesaling and retailing
distribution channels, and includes such important decision areas as customer service,
inventory control, materials handling, protective packaging, order procession,
transportation, warehouse site selection, and warehousing. Physical distribution is part
of a larger process called "distribution," which includes wholesale and retail marketing,
as well the physical movement of products.8
7

8. Figure-2.1 A Simple Supply Chain
Physical Supply
Physical Supply Physical Distribution
Physical Distribution
Distribution
Supplier Manufacturer Customer
System
Dominant Flow of Products and Services
Dominant Flow of Demand and Design Information
www.mdcegypt.com/Pages/Purchasing/Material%20Management/Physical%20Distribution.asp
http://www.enotes.com/physical-distribution-reference/physical-distribution 8

9. 2.2.1 Channel Types
As shown in Figure-2.2, the channels of distribution are broadly divided into
four types:
Producer-Customer: This is the simplest and shortest channel in which no
middlemen is involved and producers directly sell their products to the consumers.
Under it, the producer performs all the marketing activities himself and has full control
over distribution. A producer may sell directly to consumers through door-to-door
salesmen, direct mail or through his own retail stores. Big firms adopt this channel to
cut distribution costs and to sell industrial products of high value. Small producers and
producers of perishable commodities also sell directly to local consumers.
Producer-Retailer-Customer: This channel of distribution involves only one
middleman called 'retailer'. Under it, the producer sells his product to big retailers (or
retailers who buy goods in large quantities) who in turn sell to the ultimate consumers.
This channel relieves the manufacturer from burden of selling the goods himself and at
the same time gives him control over the process of distribution. This is often suited for
distribution of consumer durables and products of high value.
9

10. Producer-Wholesaler-Retailer-Customer: This is the most common and
traditional channel of distribution. Under it, two middlemen i.e. wholesalers and
retailers are involved. Here, the producer sells his product to wholesalers, who in turn
sell it to retailers. And retailers finally sell the product to the ultimate consumers. This
channel is suitable for the producers having limited finance, narrow product line and
who needed expert services and promotional support of wholesalers. This is mostly
used for the products with widely scattered market.
Producer-Agent-Wholesaler-Retailer-Customer: This is the longest channel of
distribution in which three middlemen are involved. This is used when the producer
wants to be fully relieved of the problem of distribution and thus hands over his entire
output to the selling agents. The agents distribute the product among a few wholesalers.
Each wholesaler distributes the product among a number of retailers who finally sell it
to the ultimate consumers. This channel is suitable for wider distribution of various
industrial products.
10

11. Figure-2.2 Types of Channels of Distribution
Direct Sale
Retailer
Wholesaler Retailer
Agent Wholesaler Retailer
11

12. 2.2.2 Choosing the Right Distributor 10
When deciding whether to use agents, wholesalers, brokers or retailers, to
distribute the product, it is needed to consider the following six factors as summarized
in the “Choosing the Right Distributor” on Table-2.1.
1)Number and types of customers
2)Concentration of market
3)Price of product
4)Complexity of product
5)Financial resources
6)Need for control
12

13. Table-2.1 Choosing the Right Distributor
Sell Directly Use a Agent Use a Wholesaler Use a Retailer
Number and
Types of Few Specialized Hundreds Diversified
Customers
Concentration of
Concentrated Concentrated Scattered Scattered
Market
Price of Product Expensive Less expensive Inexpensive Inexpensive
Complexity of
Highly technical Less technical Simple Simple
Product
Financial
Extensive Adequate Limited Adequate
Resources
Need for Control High High Low Low
13

14. 2.3 Activities in the Physical Distribution
The research studies findings have led many small businesses to expand
their cost-cutting efforts beyond their historical focus on production to encompass
physical distribution activities.
In the physical distribution, there are six interrelated activities that affect
customer service and the cost of providing it. They are:
1)Transportation
2)Inventory Control
3)Warehousing
4)Materials Handling
5)Protective Packaging
6)Order Processing
14

15. Chapter III
Profile of Shwe Me Company Limited
Organizational Background
Shwe Me Company Limited (SM) was founded in 1995 by three
entrepreneurs. To comply with the legal requirements under the Myanmar Companies
Act 1914, the company officially registered at the Myanmar Companies' Registration
Office in April 26, 1995.
In collaboration with its international and local business partners, SM has
successfully introduced Elephant Brand cements and construction materials, imported
from Thailand into Myanmar by sea transport. SM is not only supplying products but
also providing with quality products to its customers to have higher and better quality
structures in constructional works for all builders.
SM started it business by distribution of Elephant Brand cements and other
construction materials to meet the demand of domestic market. SM, under the
management of Board of Directors, it opened up for clients to have benefits by
engaging a wide range of products and services. At present, SM is distributing Grey
Cement and White Cement.
Currently, SM is distributing cements through 4 dealers, handling over
30,000 tons of grey cements, and 80 tons of white cement per mouth. The products are
marketed domestically, distribute to construction sites, companies and end users over
the country. 15

16. 3.3 Vision, Mission and Company Value
Vision
To provide personalized service as we strongly belief to have mutually beneficial
long-term relationship
Keeping efficient and proven track records and offering comprehensive and
flexible range of services
Mission
Identifying customer's needs and offer the best solution
Innovating at all times to work with wisdom skills and virtue to meet customers’
expectations
Company Value
Obtaining valuable national interests
Accelerate our speedy services and trade volumes
Ensuring high standard quality products and services
16

17. Figure-3.1 The Organizational Structure of Shwe Me
Board of Directors
Managing Director
Director (Admin) Director (Logistics)
Administration Operation
Account Marketing
Human Resources Construction
Transportation
Warehousing 17

18. Table-4.1 Total Number of Middlemen by Region and State
Number of
Number of Number of
Serial No. Division and State Wholesalers
Dealers Retailers
1 Ayeyarwaddy Dealer - A 5 15
2 Bago Dealer - B 6 15
3 Kayin Dealer - D 1 -
4 Magway Dealer - C 5 6
5 Dealer - B 8 -
6 Mon Dealer - D 2 -
7 Rakhine Dealer - A 2 -
8 Sagaing Dealer - C 1 -
9 Shan Dealer - C 3 -
10 Tanintharyi Dealer - A 2 -
11 Dealer - D 44 -
Sub Total 4 79 36
Total 119
18

19. Table-4.2 Total Population by Region and State (Oct 14, 2010)
Number of
Population by
Sr. No. Region and State Wholesalers and Total Ratio Ratio
Region and State
Retailers
1 Ayeyarwaddy 5,842,093 292,104
20 5,842,093 : 20
2 Bago 5,515,202 262,628
21 5,515,202 : 21
3 Kayin 1,324,504 1 1,324,504 : 1 1,324,504
4 Magway 3,759,749 11 3,759,749 : 11 341,795
5 5,759,958 8 5,759,958 : 8 719,994
6 1,875,205 2 1,875,205 : 2 937,602
7 Rakhine 2,947,859 2 2,947,859 : 2 1,473,929
8 Sagaing 4,842,801 1 4,842,801 : 1 2,421,400
9 Shan 4,474,830 3 4,474,830 : 3 1,491,610
10 Tanintharyi 1,208,212 2 1,208,212 : 2 604,106
11 5,706,846 129,701
44 5,706,846 : 44
Total 43,257,259 115
19

20. Table-4.3 Distributed Townships where Wholesalers and
Retailers existed by Region and State
Number of Townships
Serial Total Number of Townships
Region and State where Wholesalers / Ratio
No. in Region and State
Retailers exist
1 Ayeyarwaddy 26 15 26 : 15
2 Bago 28 15 28 : 15
3 Kayin 7 1 7:1
4 Magway 25 11 25 : 11
5 31 6 31 : 6
6 Mon 10 2 10 : 2
8 Rakhine 17 2 17:2
9 Sagaing 37 1 37:1
10 Shan 56 3 56:3
11 Tanintharyi 10 2 10:2
11 Tanintharyi 10 2 10:2
12 45 44 45 : 44
20

21. Table-4.4 Prices of Shwe Me Products
Serial
Product Package Price (Kyats)
No.
1 Grey Cement 50 kg 4,800
50 kg 120,00
2 White Cement
Source: SM Price List
Different from place of delivery to buyer, the prices of Grey Cements range between 4600 Kyats and 5700
Kyats. The prices of White Cements range between 4600 Kyats and 5700 Kyats, it depends on currency
exchange rate.
Although SM cements are inexpensive, it uses direct-selling channel and one to three level intermediary
channel (Dealers, Wholesalers and Retailers).
21

22. Table-4.5 Complexity of Shwe Me Products
Complexity
Serial No. Product
Highly Technical Less Technical Simple
Grey Cement
1
White Cement
2
Source: Survey Data
Highly Technical : product that requires highly-trained staff for pre-sales information and
post-sales service
Less Technical : product that does not require highly-trained staff for detailed information
about product usage
Simple : product that is user-friendly and simple for customers to use
22

23. Table-4.6 Monthly Working Capital and Cash in Hand of
Shwe Me in (2010-2011) Fiscal Year
Working Capital
(Current Assets – Current Liabilities) Cash in Hand
(Kyats) (Kyats)
Apr 2010 1078,087,650 158,446,230
May 2010 1056,036,760 153,304,970
Jun 2010 1037,002,253 154,060,650
Jul 2010 1021,200,478 174,061,170
Aug 2010 1012,926,909 186,660,090
Sept 2010 1042,412,069 189,573,690
Oct 2010 1001,544,049 142,053,140
Nov 2010 1037,312,344 162,360,660
Dec 2010 1058,216,969 179,629,860
Jan 2011 1067,621,790 164,859,690
Feb 2011 1018,815,065 161,668,365
Mar 2011 1081,368,680 185,642,280
23

24. Table-4.7 Need for Control by Involving Managers of Shwe Me
Need for Control Number of Percentage
Involving Managers
High Need for Control 37.5 %
3
Low Need for Control 62.5 %
5
Total 100%
8
24

25. Table-4.8 Mode of Transport Usage by Channel
Channel Mode of Transport
Road Rail Water Air
Channel 1
Channel 2
Ayeyarwaddy
Bago
Kayin
Magwe
Mon
Rakhine
Sagaing
Shan
Tanintharyi
Total 10 1 7 -
Percentage 55% 6% 39% -
25

26. Table-4.9 Forecasting and Inventory Decisions Made by Channel
Channel Forecasting and Order Decisions
Made Not Made
Channel 1 Yes
Channel 2
Ayeyarwaddy No
Bago No
Kayin No
Magwe No
No
Mon No
Rakhine No
Sagaing No
Shan No
Tanintharyi No
No
26

27. Table-4.10 Warehouse Usage by Channel
Channel Number of Warehouse Details
Channel 1 3 Central Warehouses
Channel 2
Ayeyarwaddy 20 Sub Warehouses
Bago 21 Sub Warehouses
Kayin 1 Sub Warehouses
Magwe 11 Sub Warehouses
8 Sub Warehouses
Mon 2 Sub Warehouses
Rakhine 2 Sub Warehouses
Sagaing 1 Sub Warehouses
Shan 3 Sub Warehouses
Tanintharyi 2 Sub Warehouses
44 Sub Warehouses
Total 118
27

28. Table-4.11 Use of Materials Handling Equipments Practice by Channel
Channel Materials Handling Equipments
Pick-up
Fork-lift Truck Pallet Others
(2-Ton) Truck
Channel 1
Shwepyithar Warehouses
Shwepyithar Warehouses 2 20 20 -
Channel 2
Ayeyarwaddy - -
Bago - -
Kayin - -
Magwe - -
- -
Mon - -
Rakhine - -
Sagaing - -
Shan - -
Tanintharyi - -
20 -
Total 2 20 40 -
28

29. Table-4.12 Packaging Characteristics of Cements
Product Name Package Size Package Type
Grey Cement 50 kg PP Bag
White Cement 50 kg PP Bag
29

30. Table-4.13 Order-to-Payment Cycle by Channel
Order-to-Payment Cycle
Channel Receipt of Cash / Credit The Whole
Delivery
Order Payment Cycle
Channel 1
Shwepyithar Warehouses
Yangon Sea Ports ≤ 1 day ≤ 1 day ≤ 1 day 30 – 33 days
Shwepyithar Warehouses ≤ 1 day ≤ 1 day ≤ 1 day 30 – 33 days
Channel 2
Ayeyarwaddy ≤ 1 day ≤ 2 day 30 days 30 – 33 days
Bago ≤ 1 day ≤ 1 day 30 days 30 – 33 days
Kayin ≤ 1 day ≤ 1 day 30 days 30 – 33 days
Magwe ≤ 1 day ≤ 1 day 30 days 30 – 33 days
≤ 1 day ≤ 10 day 30 days 30 – 43 days
Mon ≤ 1 day ≤ 1 day 30 days 30 – 33 days
Rakhine ≤ 1 day ≤ 7 day 30 days 30 – 40 days
Sagaing ≤ 1 day ≤ 2 day 30 days 30 – 33 days
Shan ≤ 1 day ≤ 2 day 30 days 30 – 33 days
Tanintharyi ≤ 1 day ≤ 4 day 30 days 30 – 33 days
≤ 1 day ≤ 1 day 30 days 30 – 33 days 30

31. Chapter V
Conclusion
5.1 Findings
By examining distribution channel of Shwe Me Co.Ltd , it is found that SM is
using two channels of distribution out of four types of distribution channels. They are:
1) Sell directly itself
Channel (1): SM (Sea Port) – Customers
SM (Sea Port) – SM (Swhepyithar Warehouses) –
Customers
2) Use dealers or middlemen
Channel (2): SM (Sea Port) – Dealers –Wholesalers – Retailers – Customers
31

32. Channel (1) is direct selling channel in which no middlemen is involved and the
producer directly sells its products to the consumers, performs all the marketing activities
and has full control over distribution.
Channel (2) is one to three levels - intermediary channels in which Dealers,
Wholesalers and Retailers act as the middlemen. The dealers buy goods in huge quantities
and sell to end users. By using Dealers and Wholesalers, it relieves SM, from burden of
selling and distribution of the goods. It also eliminates the utilization of man power in
outreach areas. It is also noted that SM is using selective distribution by limited number of
channels (direct selling channel and one to three levels -level intermediary channel).
32

33. By analyzing the choice of distributors regarding with the number of customers, it
is found that SM' middlemen deal with great number of customers. According to the ratio of
population to middlemen, it is also found that the size of population is bigger enough than
that of middlemen. (Range between 129 thousand to one and 2,421 thousand to one). Those
middlemen and end-users are diversified in the market.
33

34. With regard to distributed townships and middlemen usage by Region and State
in Myanmar, it is noted that SM has a few number of middlemen in Kayin State (just 1
middleman in 7 Townships) and in Sagaing Region (just 1 middleman in 37 Townships).
In contrast, there are large numbers of middlemen in Yangon Region (44 middlemen in 45
Townships).
It is also noted that cements are inexpensive as the price range is between 4700
Kyats and 5,600 Kyats per 50kg bags. For White Cement, the price is stable at 12,000
Kyats per 50kg bag.
As regards the complexity of product, cements are less technical products;
expressing the application method on the package so that customers can use it easily
without needing the help of highly-trained staff.
34

35. Regarding with financial resources of SM, it is noted that SM has adequate financial
resources since it has strong working capital (range between 1001 million Kyats and 1081
million Kyats) and positive cash in hand (range between 142 million Kyats and 189 million
Kyats). SM has selected the right persons for the appointment of the dealers who have
adequate financial resources and good reputation in business fields.
With regard to need for control, it can be found that most involving managers of SM
(37.5%) want to maintain tight control over product distribution and 62.5% of involving
managers do not want to maintain control over distribution.
35

36. By exploring activities in the physical distribution regarding with transportation, it is
found that SM uses road, rail and water transports for delivering goods to customers.
Pipeline and air transports are not used. Thus SM is using three modes of transportation
out of five transportation modes. It is also found that SM uses 20 numbers of it owned
Trucks for delivering goods to customers existing near sea ports and uses Common
Carriers to reach to customers far away from distribution point. 4Dealers uses 20
numbers of their owned Trucks for delivering goods to customers
36

37. Regarding with warehousing, it is noted that cements are kept at the Warehouses
located in Shwepyithar. It is also noted that SM centralizes its inventory in one place
(Shwepyithar Warehouses) in Myanmar in order to reduce warehousing and inventory
duplication costs. It is also found that there are Sub-warehouses located in respective
Region and State of Myanmar. There are 115 Sub-warehouses owned by distributors
and wholesalers.
37

38. With regard to inventory, it can be found that SM uses centralized inventory
distribution system because stock is pushed out into the system from the Shwepyithar
Warehouses.
It is found that there is the use of material handling equipments such as 2 Fork-
lifts, 20Trucks and 20 Pallets in Channel 1 and use of 20 trucks in Channel 2. It is also
found that Channel 2 is labor intensive for the movement of cement bags.
38

39. According to packaging characteristics of cement, it can be found that SM uses
moisture-proof PP bag for the packaging. By analyzing order processing with order-to-
payment cycle it is noted that the total duration takes 30 – 33 days for Channel 1 and it
takes 30 – 40 days for Channel 2 because receipt of payment from Dealers and
Wholesalers allow within 30 days.

40. 5.2 Suggestions and Recommendations
SM should reinforce its current two channels. To strengthen Channel 1, SM
should establish own Distribution Centers and branches in or near the center of district
or province cities. To make Channel 2 more effective, SM should employ more
Wholesalers and Retailers in Township-level where lack of Wholesalers and Retailers
to allocate at every prominent. In addition, SM should be aware of selecting
Wholesalers. It is important to meet the criteria of adequate financial resources,
trustworthiness and good reputation in business fields to avoid fraud.
40

41. To achieve broad market coverage, it is recommended that SM should expand several
distribution routes or all possible distribution channels.
Since SM deals with a large number of customers, it needs to use the services of
Wholesalers and Retailers other than Company owned distributors, to provide readiness
and availability of the products to customers in time. According to Table-4.3, SM should
be broadening middlemen usage in other Townships to expand the number of Townships.
On the other hand, as the customers are geographically dispersed and the market is widely
scattered, it can be more economical to use the services of Wholesalers and Retailers.
Thus, SM should establish branches in densely populated areas by appointing new
Wholesalers and Retailers.
41

42. Regarding with the price of product, it is suggested that SM should employ more
Wholesalers and Retailers since price of cements are inexpensive. As cheaper items,
cements should be sold in bulk to Intermediaries or Companies who make use of
benefits in "Economy of Scales".
Since cements are less technical complexity, it is agreeable that SM is using
Dealers and Wholesalers as Intermediaries. SM should employ more middlemen to
main fluctuation of price and to control over them.
42

43. Since financial resources are adequate, SMC should establish own distribution
centers as branches and provide warehousing facilities in rural, remote areas, and
remaining townships. In addition, SM should use all available outlets to persuade
Wholesalers and Retailers to enlarge coverage of the cement market.
Regarding with the mode of transportation, SM should use inland water transports
for the best suited to moving large quantities of consignment with low cost. For speedy
and flexible delivery, SM road transport is the best.
43

44. It should have more Sub-warehouses in hard-to-reach areas like Kayin State and
Shan State. When choosing warehouse locations, it is suggested that for the best
determinations, it make on proximity to the market and distance to terminals should be
taken into account.
With regard to inventory control, Shwepyithar Warehouses should keep to
minimum balance with inventory to deliver in needs of each distribution center (Sub-
warehouses of Dealers and Wholesalers). Since Dealers and Wholesalers are closest to
the marketplace, they have the capacity to know what the customer needs. So, the best
performance in coordination between Sea Ports, Warehouses and Distribution Centre
(Sub-warehouses) is advisable. By doing so, SM can has responsiveness to meet local
demand and attain the high degree of customer services.
44

45. To improve distribution efficiency of Sub-warehouses owned by Dealers and
Wholesalers, it has to provide cargo handling equipments such as Pallet, Fork-lift and
Pick-up Trucks. In consideration for the capital investment of using such equipments,
Dealers and Wholesalers should be made balance between capital cost and operating
cost of distribution centre.
It is recommended that SM use an appropriate computerized system and software
for order processing, inventory management and warehousing, so that stock levels and
delivery schedules can be updated accordingly.
45

46. In conclusion, since cements are no needs of selling directly by the Company, tight
control over distribution is no necessity for SM. Thus, it is strongly recommended that
SM use intensive distribution option by placing its products in as many places as
possible. In the local market, there are a few ranges of acceptable cement brands.
Therefore comprehensive distribution system should be applied. SM should also well
execute the efficiency of functioning activities in the physical distribution with more
compatible times and places.
46

47. 5.3 Needs for Future Research
This research only covers two specific objectives: the distribution channel
structure and the physical distribution activities of Shwe Me in Myanmar., this study is
somewhat limited in scope other competing companies in the same industry is
recommended for future researchers .
47

48. 48