Distribution of Products/Pricing

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QUESTION: Hi....I have a question, I am planning to embark a business association with a manufacturing company. While the product comes out in the market, there will be a manufacture's logo printed on the pack. From the business point of view, my manufacture's name also getting marketed along with my product, here I am spending for the materials, production cost, marketing and etc. Kindly give a idea how to deal with this.

Regards
Shareer

ANSWER: Hi and Good day

Thanks for the query

I understand that you are doing some kind of contract manufacturing for a principal OEM. You may be taking up some kind of conversion on the base product given by the OEM. Therefore you also spend time and effort in materials, production, marketing, logistics etc. The OEM product comes out with their own branding and you also specify your branding on the product line.

The easiest way to understand this, would be check out the breweries. You will find that most of the breweries do the contract manufacturing based on technology transfer from the principal. The bottle or product has the original branding of the OEM, where the brand is very well known and it has another logo which mentions bottling, packing etc by the contract manufacturer. Normally they don't allow multiple logo in the label and only contract manufacturer company information can be displayed

Best option to have a discussion with your principal with an open mind. At the end of the day, the principal has spent significant time and effort in creating a product and brand. The agreement shall depend on the size of market, the margins, the market share of the principal, exclusivity etc and also depends on your own company size...if you are established, you will normally get an option, otherwise you need to follow the principal's terms as everywhere.

But overall, if this gives you a opening in building a large business, set up a limited time frame of 3 years on the agreement and move forward if its fine with you. Once you have also established yourself in the market, you will get an opportunity to partner with the principal

Wish you and best and please feel to revert for clarifications/ additional requirements

Thanks
Shaju

---------- FOLLOW-UP ----------

QUESTION: Thank you for the reply, sir. I am actually preparing MoU between these two companies...It will be grateful if can send a sample of MoU.

manythanks
Shareer

ANSWER: Hi and Good day

Nice to know that you are moving to the memorandum of understanding document with your principal. Instead of working on a draft and/or some other related MoU, please connect with your legal counsel and explain your business and services that you are planning to take up as a part of this deal. In greater detail explain your principal's line of business, their people, brand value, your association, general terms and other areas that you think need to be covered in the MoU.

The MoU should primarily protect each party's rights and also detail the scope with roles and responsibilities, terms and conditions related to commercials, non confidentiality, exclusivity if applicable and a fixed term period. Typically MoU's are done for a short period and these culminate to a Master Services Agreement - MSA on or before the expiry of the MoU term.

Suggest you take this route and you will definitely see great success. Another interesting aspect, is when you discuss with your legal counsel, you will also get more clarity on this partnership.

With you the best

regards
Shaju Madhavan

---------- FOLLOW-UP ----------

QUESTION: Hi Sir,

Hope you are doing good.

Its me again; this time I am with different subject.

I am confused with the pricing methods, since I am marketing the products in Muscat producing the products from India; INR is always fluctuating, currently it is very low against USD thus the OMR (Omani Rials) is on its high trend against INR. So while I covert the price, should I take current currency value or the standard currency value? Or is there any formula to solve such problems.
Kindly help...  

Regards
Shareer Mohamed

Answer
Hi and Good day

Understand that you are into trading of products/ services out there in Oman. Ideally when you are purchasing from a country like India and selling in Oman..typical forex related issues like yours crop up...best option is to use the US Dollar as the benchmark for all your deals..Normally from my experience have seen the USD to Riyal or gulf currencies ratio remain pretty stable than the Asian currencies..

So ask your Indian seller to price everything in USD and use USD (converted to Omani Riyals) for your sales at Oman. You can also hedge the forex differences if you are doing large volumes...also there is a possibility of something like a forward contract, where trading companies use the banks as a third party in the transaction and hedge a certain value of their future remittances..this is again risky and needs strong understand of market..

Best option would be to run with the US Dollar benchmark and you should be good..again, as mentioned everytime, we can only support your queries based on information you provide...on any business decision, please look at all alternatives and check out the risks before moving forward

In case of any additional requirements, please connect with a private query and provide more details as well..

Wish you the best

regards
Shaju

Distribution of Products

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Shaju Madhavan

Expertise

Questions related to Logistics/ Transportation & SCM. B2B services/ Online Freight Exchanges/ IT Solutions like TMS/ WMS and Inventory Softwares. Technology applications like GPS based tracking solutions. Logistics services related questions like distribution planning and optimization, cost reduction & six sigma, inventory reduction & accuracies, WH design etc. In additions, questions on technology, B2B, B2C, Startups, ERP, Development and implementation, Merger & Acquisitions etc can also be queried

Experience

17 years of experience in Project Management, Logistics/ Transportation and SCM in India. Direct Implementation experience include - Logistics Business Consulting (Warehousing, Fleet Management, Distribution etc) - Inventory Management and Inventory Accuracies - Distribution, Network, Fleet Optimization - RFID, Barcode implementations - Business Plan, Business case, Startups, Advisory - Demand Planning & Forecasting - Supply Chain Design - 3PL/4PL services - Indian Logistics space - Cost reduction & Six Sigma - Logistics Contracting - IT enabled Logistics BPR - Logistics IT solutions like TMS/ WMS etc - Technology Applications deploying GPS/ GIS based applications - MR and MI reporting in this space

Organizations
- Thermax Ltd - indiatransportal.com - one of the first b2b for transportation in India - infreight.comn - b2b and online freight exchange - Infreight Logistics Solutions Ltd - Consulting/ Technology and Operational Solutions Company

Education/Credentials
Graduate Engineer with executive general management from IIM, Bangalore

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