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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?
   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
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
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!

                                           ……




 Geographic Information Systems (GIS)


Outlets                 Pasar Mini Effis
                        Category: Convenience
                        Contact: Mr. Tan 0122345678



                                        Sales Performance
                                            Cost-To-Serve
                                             Demographic
                                          Points of Interest
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
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
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
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
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
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?
Thank you

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John talbot achieving visibility & control

  • 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?