1. 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
2. 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?
Allied defence was a management failure
The primary cause: Mindset Inertia
10 Dec 1941:
The Japanese road bicycles through Malaya’s
Prince of Wales & Repulse, without air-
“impenetrable jungle and mangrove swamps”
support, sunk by Japanese bombers off
Kuantan
In fact, Malaya had SE Asia’s most developed
road network.
It was built by the British
3. 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?
Manufacturers harvesting
real-time data – and having
the analytical capability to Distributors with the will
use it to effectively drive (mindset), competency and
growth through well tools to manage their
coordinated sales and supply Salesmen trained
business effectively –
chain operations and equipped to
continually tracking (and
be effective and
reporting on) sales and
productive at the
inventory performance
point of sale
Better Service at Lower Cost
4. 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
5. 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
6. 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
7. 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!
……
Geographic Information Systems (GIS)
Outlets Pasar Mini Effis
Category: Convenience
Contact: Mr. Tan 0122345678
Sales Performance
Cost-To-Serve
Demographic
Points of Interest
8. 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 reporting
• 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
9. If we have CTS by outlet, then we have it by…
By sales territory
By salesmen
By distributor
By sales region
Nationally (with apologies to EM)
Geographic Information Systems (GIS)
Average household incomes
Upper tier
Pasar Mini Effis
Category: Convenience
Middle tier
Contact: Mr. Tan 0122345678
Lower tier
Sales Performance
Cost-To-Serve
Demographic
Points of Interest
Schools
10. 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 Example 2:
quarterly for Review of
each distributor
distributor boundaries,
based upon:
- Area sales
effectiveness
- Overall
cost-to-serve
11. Some future scenarios
1. GPS and GIS systems
2. Network rationalization
3. Collaboration
Sales collaboration
Pasar Mini Effis
Category: Convenience
Manuf. 1 Contact: Mr. Tan 0122345678
Manuf. 2
Manuf. 3
Manuf. 4 Sales Performance
Cost-To-Serve
Demographic
Points of Interest
12. Sales Collaboration:
Outlet performance vs. peers
Logistics Collaboration: Today’s structure
Manufacturers
Manufacturers’ DCs
(increasingly operated by
3PLs) directly replenish
distributors:
• Intermittent deliveries
• High inventories
• High storage costs
Distributors
Despite high inventories
the most common cause
of underperformance is
Missed sales due to
stock-out at distributor
Outlets
Outlets suffer poor service
and look elsewhere for
product
13. Logistics Collaboration: Tomorrow’s structure?
Manufacturers
2) Send one
bulk order to
each DC Bulk pick of single order
FTL delivery to cross-dock
-DOCK
1) Generate daily CROSS
Daily scheduled delivery
replenish request
via VMI process (multi-product) to each
distributor
Distributors
Reduced or zero
inventory
Outlets
Improved service & availability
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?