A presentation by Elmien Sambandan PMP®, Manager Africa Team for Supply Chain Transformation and Operations Advisory, EY, South Africa. Delivered during the 38th annual SAPICS event for supply chain professionals in Sun City, South Africa. It takes a musical genius to orchestrate a rock band and classical orchestra at the same time. The contrast is similar when balancing cost efficiencies and investing in growth in an organisation. Nigeria is one of the most attractive consumer markets in Africa, with promising double digit growth whilst ensuring supply chain efficiencies. This presentation provides practical examples to address these key challenges, such as price sensitive consumers and distributors, fragmental logistics network, limited network visibility and complex product portfolios.

1. Orchestrate the Balance
between a Growth Strategy vs.
Driving Cost Efficiencies
By Elmien Sambandan

2. Elmien is a manager in the Africa team for Supply Chain and
Operations Advisory at EY. She holds a degree in Industrial
Engineering as well as an engineering honours degree in
Management of Technology, both from the University of Pretoria.
Elmien is a certified project management professional (PMP®)
and has more than 8 years’ experience in Supply Chain
consulting in various countries in Africa.
She has experience as a project manager for new product
development, especially for African countries, at a large global
consumer products manufacturer. Her supply chain expertise
spans across supply chain strategy and design, supply chain
network optimisation, inventory management, integrated
business planning and new product development processes.
Elmien is a member of the South African Institute for Industrial
Engineers.
Speaker Biography – Elmien Sambandan

3. • Nigeria Consumer Market Landscape
• Growth Enabler – Route to Market
• Emerging Market Strategy: Efficiency vs. Investment
• A Case Study – Multinational FMCG Company
• Conclusion
• Appendix
Elmien Sambandan
Agenda
1
4
3
2
5
6

4. Elmien Sambandan
► Mostly Christian
► Higher income
► Lower unemployment
rate
► Southern residents are
more likely to try new
things
► Lagos residents are
more price conscious,
with 55% favouring low
prices over a large
selection of products
► Mostly Muslim
► Lower income
► Higher unemployment
rate
► Only 18% of Kano
residents are likely to
try new things
► Northern Nigerians
seem less price
conscious
Northern NigeriaSouthern Nigeria
Source(s): Nielsen; Mckinsey; EY analysis
Nigeria’s consumer base is quite diverse with prominent differences between
the northern and southern regions.
Nigeria Consumer Market Landscape

5. Elmien Sambandan
0.0
0.5
1.0
1.5
2.0
2.5
3.0
2010 2015 2020 2025
Algeria Egypt Morocco
Tunisia Botswana Ghana
Kenya Namibia Nigeria
South Africa
Source: IHS GlobalInsight
160
81
41
50
24
2
240
101
56 54
33
0
50
100
150
200
250
300
Nigeria
Egypt
Kenya
SouthAfrica
Algeria
Morocco
Ghana
Tunisia
Namibia
Botswana
2010 2025
Population growth (%) Population growth (million persons)
Nigeria’s consumer base is the largest and fastest growing in Africa, exceeding
200 million by 2020.
Nigeria Consumer Market Landscape
►Nigeria has a growing middle income consumer and has one of the fastest growing
consumer-driven GDP’s in Africa

6. Elmien Sambandan Source(s): Santander; EY analysis
The
Traditionals
The Rising
The Thriving
► Consumers with low and irregular income
► Very price sensitive, this segment depends on cheap
products mostly from informal markets
► This is the largest group of consumers
► Middle class consumers with stable and rising income
► Even though this segment bases their choices on
quality and practicality of products, the price remains
an important factor
► This segment relevancy is increasing
► Consumers with a higher income and high level of
education
► Mostly composed by cosmopolitan professionals; this
segment focuses on high quality, fashionable products
purchased in supermarkets or abroad.
► This segments represents a minority of the population
The consumers can be described in 3 distinct profiles: The Traditionals, the
Rising and the Thriving.
Nigeria Consumer Market Landscape

7. Elmien Sambandan
►Nigerian families focus their main expenditures in essential items as Food and Non-
Alcoholic Beverages disregarding discretionary items such as leisure.
►Utilities expenditures are lower than in South Africa due to limited accessibility of
water, electricity, gas and other fuels to organised entities.
Nigeria Consumer Market Landscape
It is an attractive emerging market for consumer products companies, with
food being the major spend of households in Nigeria.
Sources: AfDB 2009 ; EY Analysis
US$ 127bn US$ 171bn

8. Growth Enabler – Route to Market
Elmien Sambandan
Maximising the growth opportunity in Nigeria, the products should be aligned
to the targeted consumer base and enabled through the Route to Market.
ProductsConsumers
• Locally Relevant (unique)
• Single use pack formats driving
complexity
• Rising input costs
• Irregular or low income
• 50% of population <15 years
• Demand concentrated in Kano and
Lagos regions
• Price sensitive; need low,
competitive price points
• > 900,000 outlets for sales; traditional trade >90%
• Lack of control and visibility over route to market
• Long lead times at the Lagos port, affecting shelf life and working capital
• Logistics and distribution is a key differentiator given the infrastructure
Route to Market

9. Growth Enabler – Route to Market
Elmien Sambandan
1. Choosing which markets in which to compete
2. Shaping propositions for diverse consumers
3. Controlling the route to market
4. Innovating for local context
5. Being locally relevant…social license to operate
There are 5 Critical Success Factors for maximising the opportunity in Africa,
one of them a competitive edge and impacting the Supply Chain significantly.

10. Elmien Sambandan
Controlling the route to market is a costly exercise, requiring investment.
Considering a company’s growth phase, determines the focus of investments.
Emerging Markets: Efficiency vs. Investment
Market Entry
High Growth
Critical Mass
Sustainable Growth
– Low utilisation, invested capacity
– Growth lags the investment
– Build product brands
– Launch locally relevant products
– Low margin, high growth
– Sales volumes lag supply chain
investment, but reaching towards
critical mass
– Build Supply Chain capabilities
– Invest in Sales capability
– Drive product volumes to reach the
critical mass
– Sales volume is suitable for the
type and size of operating model
– Supply chain capability extracts
value out of critical mass
– Drive cost efficiencies
– Optimise customer/product portfolios
– Optimise supply chain
– Invest in Sales capability
– Need to find new growth
opportunities
– Drive market share and/or
penetration
– Innovate
– Reconsider the operating model

11. A Case Study – Multinational FMCG
Elmien Sambandan
► Manufacturing plant
► 2 warehouses, 14 depots
► 500+ Distributors
► ± 40 SKUs
► Overall 60% utilisation of depots
► Inventory: 7d fast moving; 78d tail end
An established consumer products manufacturer has reached critical sales
volumes to consider driving operational efficiencies whilst growing to the next
level.
Challenges:
►No control or visibility over distributor order size/frequency.
►No visibility of outlets penetration.
►Product availability at distributors/outlets not controlled.
►Distributors have limited and fluctuating cash flow.

12. Elmien Sambandan
A Case Study – Growth Strategy
The company invested in strategic growth initiatives that would increase their
control of the route to market from their own warehouses to include distributors.
► Build partnerships with key
distributors
► Allocate geographical locations to
distributors
► Launch 3 new products
► Deploy sales force at key distributors
► Provide micro-financing to
distributors to relieve cash flow
constraints
► Launch mobile app for sales force to
track sales and inventory at
distributor, providing visibility
Growth Initiatives
► Increased visibility at distributors:
– Inventory holding
– Daily sales patterns
– Promotions and pricing
► Increased control of inventory at
distributors:
– Cash flow enables purchases
– Normalised order patterns
– Reduced variance in supply chain
► Distributors take joint responsibility
for geographical areas
► Innovation of new products creates
consumer excitement to drive growth
Impact

13. Elmien Sambandan
A Case Study – Cost Optimisation
The cost optimisation initiatives pursued by the company was not going to have
a significant cost reduction impact, but rather risk additional loss of sales.
► Reduce transportation costs
► Reduce costs of regional depots
through consolidation
► Reduce overall inventory holding
Cost Optimisation Initiatives
► All warehousing and transport costs
was only 5% of sales
► 2-7 months in a year, they are out of
stock on the top 4 fast moving SKUs.
Inventory holding is too low
Cost Analysis
► Rationalised non-profitable products
► Optimise inventory policies
► Use key distributors for decentralised
“warehousing” space
These cost optimisation initiatives pursued will not have a significant impact on costs, but risk
reducing product availability, negating all the investment created in the growth initiatives.
Revised Optimisation Initiatives
► Increased product availability from
manufacturing, in warehouses as well
as at distributors
► Create manufacturing capacity for fast
moving SKUs
Impact

14. ► The battle for share of discretionary spend is won or lost at the
point of buying, where the consumer makes buying decision.
► Product availability at consumer point of buying is critical to
compete; i.e. penetration of outlets is necessary.
► The supply chain capability and route to market is a critical
enabler to ensure product availability.
► The degree of control over the route to market is a competitive
advantage.
► The investment required to control the entire route to market may be
astronomical and thus requires a pragmatic approach to achieve the
balance between growth and costs.
Elmien Sambandan
Conclusion
The case study is an example of the pragmatic route to market approach
required to orchestrate the balance between growth strategies and driving cost
efficiencies to ensure product availability.

15. Appendix
Elmien Sambandan
• Route to Market Framework
• Route to Market Distribution Model Alternatives

16. Elmien Sambandan
Assessing or designing an organisation’s route to market model can be done using the
following framework and maintaining the needs of the consumer at the centre of the
solution.
Route to Market Framework
Source: EY

17. Elmien Sambandan
Route-to-market Framework
A further breakdown of the framework provides key operating model components that
need to be addressed to ensure a holistic route to market design.
Route to Market Framework
Source: EY

18. Elmien Sambandan
► Prime distributor(s)
order(s) and import(s)
the product
► Route to market may
pass through other
distribution tiers, e.g.
sub distributors and
wholesalers prior to
reaching consumers,
especially in traditional
trade markets
► The distributor(s) are
accountable for supply
chain, sales, customer
contact and marketing
activities
As export except:
► A subsidiary is created in
country to manage the
supply chain (including
importation,
warehousing and
transportation to the
distributor), manage the
distributor and support
local marketing
initiatives, e.g. materials
localization
► The subsidiary receives
demand plans from the
distributor and
calculates net
requirements
As import except
► The subsidiary manages
all marketing and
customer contact
activities, including key
accounts, order
management and
collections
► The distributor manages
the sales force only and
does not take title to the
product
► The subsidiary manages
all in country activities
including distribution to
consumers.
► Greater control of value
chain and accuracy in
demand requirements
planning.
Imports, manages logistics
and orders, invoices
Sales to customer
Manages logistics, sales
and marketing
IMPORT2
Produces and delivers
Same as import plus
marketing
Sales to customer
Manages
sales force
AGENT3
Produces and delivers
Sales to customer
Same as Agent plus
sales
FULLY
FLEDGED
4
Produces and delivers
EXPORT1
Produces, delivers and
invoices
Imports and distributes
Sales to customer
DIRECT TO
CONSUMER
5
Produces and delivers
Sales to customer
3PL
► Head office ships direct
to consumer and saves
costs
► 3PL provider could be
contracted or employed
to distribute without
owning inventory
► Sub distributor utilized
to access rural markets
that are too hard to
penetrate. Typically used
when accessing markets
of traditional trade.
c
b
a
d
a Headquarters b Subsidiary c Prime Distributors d Sub distributors,
wholesalers, retailers
Billing and collection
Purchase Order
Product delivery
Sales negotiation
Significant thought needs to go into what the “in-market” operating model needs to be,
especially around the route to market and the degree of control required.
Route to Market Model Alternatives
Source: EY