Achieving Visibility and Control over Sales and Supply Chain Operations – With a Discussion of Future Scenarios John Talbot, Partner Agenda • A lesson from history? • Effective defence of the General Trade • Some case studies • The near future
Achieving Visibility and Control over
Sales and Supply Chain Operations
– With a Discussion of Future Scenarios
John Talbot, Partner
Agenda
• A lesson from history?
• Effective defence of the General Trade
• Some case studies
• The near future
A lesson from history?
8 Dec 1941:
Japanese land in Kota Bharu
11 Jan 1942:
Kuala Lumpur falls
15 Feb 1942:
Singapore surrenders
What went wrong?
10 Dec 1941:
Prince of Wales & Repulse, without air-
support, sunk by Japanese bombers off
Kuantan
The Japanese road bicycles through Malaya’s
“impenetrable jungle and mangrove swamps”
In fact, Malaya had SE Asia’s most developed
road network.
It was built by the British
Allied defence was a management failureThe primary cause: Mindset Inertia
Why are we talking about events 70 years ago?
At a time of aggressive Modern Trade (MT) growth in Asia, FMCG
manufacturers must comprehend that an effective defence of the
General Trade (GT) is required to protect margins
The 1941/42 Malayan campaign demonstrated that, until the crisis hits,
it is a human trait to ignore whatever evidence threatens our
comfortable existence
Could parts of the FMCG industry be suffering from Mindset Inertia?
What is an effective defence?
The most effective defence is to visualize and sponsor a progressive, service orientated GT that plays to its strength in providing consumers with
convenience and proximity.
What could this look like?
Distributors with the will
(mindset), competency and
tools to manage their
business effectively –
continually tracking (and
reporting on) sales and inventory performance
Salesmen trained
and equipped to
be effective and
productive at the
point of sale
Manufacturers harvesting
real-time data – and having
the analytical capability to
use it to effectively drive
growth through well
coordinated sales and supply
chain operations
Better Service at Lower Cost
Some quick comments on the GT
• The GT’s core is made up of (family owned) distributors contracted to serve retailers in a given geography.
• Key roles are penetration the market and to handle the credit risk
• The GT is amazingly resilient, despite:
– Poor service from manufacturers
– Erratic reporting demands, 3rd rate systems
– Lack of training in modern best practices
– Push orientated manufacturer sales practices
– Lack of clear guidelines
– Uneven playing field (master-servant relationship)
• But ultimately the GT will only survive if develop ability to get product on shelves:
– Consistently
– At right price
– In good condition
– Well presented and supported
• Fragmentation has been the chief obstacle to development of this sector
What people are doing today?
1. A Malaysian distributor
2. Malaysian based manufacturer
3. Indonesian based manufacturer
Case 1: A Malaysian distributor
Actions:
• Upgraded facility
• Installed a WMS
• Drove disciplined work practices
(despite initial resistance)
Results (from his biggest agency):
• 34% Y-O-Y sales growth (vs. 13% national average)
• Inventory down by 40% (in days cover)
• Stock availability much higher
• Improved productivity
• Reduced returns and rejections
• Near zero shrinkage
Case 2: Malaysian based manufacturer
Action:
• Rolled out Distributor Management System (DMS) across 26 sites
• Continual system monitoring & support
• Systematic data harvesting and analytics
Results:
• Reduced average distributor inventory from 30 to 14 days
• Increased retail service levels
Action phase 2 (current):
• Automating VMI based on pre-defined rules
(promo-forecasts/sales/vehicle capacities)
• Salesforce Automation across both MT and GT
Case 3: Indonesian based manufacturer
Similar roadmap to Malaysian manufacturer ( but over 90 depot & distributor sites)
But then using the new transparency/control to rationalize their Java network:
3 DCs
27 Depots
Traditional fleet 2 DCs
5 Depots
22 Transship points
Modern fleet
Benefits:
� Windfall benefit from sale of properties
�Halving of finished goods inventory
� Marginally reduced operating costs
� Simplified planning
� Massive carbon-footprint reduction
� Exponentially improved flexibility for future network development
Some future scenarios
1. GPS and GIS systems
2. Network rationalization
3. Collaboration
Prediction: Salesmen will all have mobile technology
Why?
•Lower cost hardware
•Lower cost software
•Better, more intuitive user interfacing
•Increasing accurate GPS
•Lower cost connectivity
•Me too effect!
……
Outlets Pasar Mini EffisCategory: Convenience
Contact: Mr. Tan 0122345678
Sales Performance
Cost-To-Serve
Demographic
Points of Interest
Geographic Information Systems (GIS)
GPS will provide
100% salesmen tracking
So now we know:
+Travel to outlet+Time at outlet+Travel from outlet+Sales at outlet
+Returns from outlet (with associated cost allocations)
Allocate in warehouse and inventory based costs
= cost-to-serve by outlet
• Cost-to-Serve
– Calculated as Salesman cost + Delivery cost + Cost of handling and processing returns
represented as a % of sales
• Apportioned travel time
– Proportion of total time spent travelling, either by salesman or delivery vehicle that is
spent on reaching a particular outlet
• Average time spent at outlet
– Time spent by salesman or delivery vehicle at outlet to make a sale / waiting time +
loading and unloading time
Cost to serve reporting
If we have CTS by outlet, then we have it by…
By salesmenBy sales territory
By distributorBy sales region
Nationally (with apologies to EM)
Pasar Mini EffisCategory: Convenience
Contact: Mr. Tan 0122345678
Sales Performance
Cost-To-Serve
Demographic
Points of Interest
Upper tier
Middle tier
Lower tier
Average household incomes
Geographic Information Systems (GIS)
Schools
Some future scenarios
1. GPS and GIS systems
2. Network rationalization
3. Collaboration
Network rationalization
Once you have a live (geo-coded) database, you have enormous
potential to explore options to improve network productivity
Example 1: Salesman
and delivery territory optimization - run quarterly for each distributor
Example 2: Review of distributor boundaries, based upon:- Area sales effectiveness
- Overall cost-to-serve
Some future scenarios
1. GPS and GIS systems
2. Network rationalization
3. Collaboration
Sales collaboration
Manuf. 1
Manuf. 2
Manuf. 3
Manuf. 4
Pasar Mini EffisCategory: Convenience
Contact: Mr. Tan 0122345678
Sales Performance
Cost-To-Serve
Demographic
Points of Interest
Sales Collaboration: Outlet performance vs. peers
Distributors
Manufacturers
Outlets
Manufacturers’ DCs
(increasingly operated by
3PLs) directly replenish distributors:
• Intermittent deliveries
• High inventories
• High storage costs
Despite high inventories the most common cause of underperformance is
Missed sales due to stock-out at distributor
Outlets suffer poor service
and look elsewhere for product
Logistics Collaboration: Today’s structure
Logistics Collaboration: Tomorrow’s structure?
Distributors
Manufacturers
Outlets
CROSS-DOCK
2) Send one bulk order to each DC
Daily scheduled delivery
(multi-product) to each
distributor
Reduced or zero
inventory
Improved service & availability
Bulk pick of single order
FTL delivery to cross-dock
1) Generate daily replenish request via VMI process
In conclusion….
The convergence of…
Need
Infrastructural development
Low cost technology
Low cost connectivity
Embryonic collaboration forums
...opens up a massive opportunity to rethink how
we serve the consumer.
Will we take it?
Thank you