Distribution

Consumer Products Distribution Chain
↓ ↓ ↓ ↓ Plant Depots in state capitals / major cities Distributors Retailers

Distribution: Typical Model
DISTRIBUTOR

PLANT

DEPOTS

RETAIL

Distribution: Current Model
• Home grown “Indian” solution • Evolved to service retailers across the country – millions of them • Low cost – In particular, manages last mile delivery efficiently • Driven & sustained by regulatory environment
– CST – Local regulations (Sales Tax, Octroi, Licences..)

• Well established legacy, several decades old.

Is this going to remain the same way in future ?

Is this sustainable? Does this model serve needs of current times?
Of the manufacturer Of the Retailer

The Larger Picture
• Manufacturing became “modern” decades ago • Retail became modern less than a decade ago and ‘modern trade’ is growing

Modern Manufacturing…. …….Modern Trade ….What about Modern Distribution?

What is Modern Distribution?
• • • • Organised Scale / scalability Reach Driven by agreed KPI’s & processes that assure achievement of KPI’s • Technology Enabled

Why ‘Modern’ Distribution?

Does the current model meet current needs? • The current Model evolved when Modern Trade did not exist
– Needs of Retailer – Needs of Manufacturer servicing Modern Retailer

Distribution is not just about trucking & storing

Optimal fulfillment of customer needs at minimal cost
1. Customer Satisfaction 2. Cost

Sustainable logistics need performance on both

Sustainable Logistics: Needs Performance 1. Shelf Availability
% of articles on the shelf

2. Logistics Cost
% of Sales

3. Total Inventory
Days of stock
Performance on these needs capability for measurement – rigorous, accurate & continuous

Measurements lead to Improvement
• Current order fulfillment in 48 hours ? Target same day, 4 hours…? • Current fill rate is 80% ? Target 95% • Current accuracy is 98%? Target six sigma? • How can my business grow @ 50%, why can’t my logistics cost come down by 20%
What is my ‘cost to market’? What’s my ‘time to market’?

Emerging Solution which address current & future needs

Modern Brand Distributor

What is a Modern Brand Distributor? (MBD)
• Distribution of branded products from brand owners to retailers & other channels. • Products are sold by the brand owner to the distributor, with a pre-agreed mark-down. • Physical distribution is an integral part of the service, wholesaler being the other major part. By acting as a wholesaler, the distributor takes over the receivables exposure from the brand owner.

Advantage MBD to Manufacturer
• MBD simplifies relationship management for the brand owner by becoming one wholesale customer replacing hundreds of customers.
– – Leaner Sales org at regional level & more professional relationship mgmt Leaner commercial org at regional and national level

MBD distributor also obviates the need to have company depots / C&F agents
– Leaner Distribution org needed for managing inventory, relationship and commercials with depots.

MBD distributor takes over from the brand owner the major part of
– – – Inventory carrying Customer credit Receivables exposure Trade promotions Consumer promotions Faster and synchronised, new product / pack/ promotions roll outs

MBD distributor can make it easier for the brand owner to manage
– – –

With IT & connectivity capability, MBD can provide superior information which will help track product life cycle & consumer response better.

Advantage MBD to Retailer
• MBD will service each retailer with key account managers at the category mgmt level. This will facilitate retailers plan & execute promotions & other activities across geographies better. Retailer will have one vendor across the country for the brand and for multiple brands. By having wider control on inventories, MBD will be able to offer significantly better fill levels and make Auto Replenishment work effectively. Retailers will be able to interface their IT systems to MBD systems thereby substantially improving information flow & operational efficiency. MBD’s focus will be optimal profitability through maximising sales compared to a conventional distributor’s ROI approach. This way, MBD can ensure brands remaining “active” at the stores so revenue to retailer is maximised.

• • • •

Opportunities
• Brand owners seek to focus on their core competence – marketing brands • Companies want to become leaner • Companies are generally dissatisfied with the current distribution model – service, quality, cost & flexibility • Companies are willing to outsource supply chain as they increasingly see ownership as ability to drive performance around KPI’s instead of ‘control’ on assets.

Customer Space
• Value of BDS is more when the brand owner need not drive day to day sales directly
– Predictability of demand: Stable or steadily growing product range – Relatively fewer SKU’s – Product unit value is not very high, but volume is high & hence the distribution cost as % of sale is significant ( 2 to 10%) – Products can be consolidated – do not need special care (not fragile, perishable or hazardous) – A significant share in Modern Trade

Using these filters categories suitable for BDS:
– FMCG (Processed & Packaged Food, Personal Care, Hygiene & Home care, Cosmetics) – General Merchandise (Luggage, Crockery & cutlery, Footwear, Toys, IT, stationery & office products) – Home – Appliances (of value < 5000) – Value apparels

FAQ’s - Brand owners perspective
Question
Will I lose my control over distribution? After all, distribution is one of my core strengths.

Response
You do not lose any control. On the contrary you will have a superior control on distribution. You will have complete visibility on transactions. You will manage better through agreed KPI’s

I ‘own’ my relationship with the Trade, by directly servicing them. Will this get diluted?

What we seek to manage for you is transactions and execute your sales plans. Yes we will also be able to contribute to increasing your sales. By taking transactional relationship on us, you will actually be able to focus on strategic relationship building with Trade. We will promote direct engagements between companies & trade through joint planning meetings, brand councils & co-sponsored events If you are already using a MT channel distributor, we will not cost you more. We are realistic that the margin in this business is very thin. The extra margin (1 to 2%) is more than offset by benefits. We want you to engage us only if you see value being added.

Do I have to part with extra margin?

FAQ’s - Brand owners perspective
Question
Aren’t we putting all eggs in one basket?

Response
We are not merely asking you trust us but will go an extra mile to protect your interests through appropriate legal framework (eg. Binding SLA’s, fair exit / transition clause..) We will be able to demonstrate professionalism & customer bias. Top level engagement to build strategic alignment. We will ensure that information is handled with sensitivity. We will put our own systems and will also meet any customer specific requirements. Competing brands will be handled by separate sales / key account teams. On a case to case basis, we may agree not to take up competing brands.

How do we protect sensitive information? Will you be handling competing products?

Modern Distribution – The next level of excellence in Distribution of Consumer Products

Thank you

Future Logistics

Future of Logistics

Consumption Supply Chain

Consumption Solutions

The 30 Supply Chains of Consumption

Deconstructing Logistics Deliverables

• • • • • • •

Over 2.9 million SKU’s Over 1600 outlets Upto 4 million pieces handled everyday Inventory of over 30 million pieces 67 warehouses / distribution centers Covering 3.5 million sqft 500 vehicles-strong dedicated fleet and thousands of outsourced trucks

The End-to-End technology enabled Supply Chain

The End to End Technology Enabled Supply Chain

Supply Chain Solutions
Supply Chain Services
• • • • • • • • factory-gate logistics storage & fulfillment retail store replenishments movement (nationwide and intracity) cold chain freight forwarding & custom clearance reverse logistics distribution services

Value-Added Services
• • • • • • • inventory planning & control support vendor management supply chain network modeling quality assurance bar coding services process & productivity management services packaging solutions

We shall deliver Everything, Everywhere, Everytime for Every Indian Consumer in the most profitable manner.

Thank you

Future Logistics

Future of Logistics

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