Distribution

Consumer Products Distribution Chain

↓ Plant
↓ Depots in state capitals / major cities
↓ Distributors
↓ Retailers
 Distribution: Typical Model

DISTRI-
BUTOR
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
• MBD distributor can make it easier for the brand owner to manage
– Trade promotions
– Consumer promotions
– Faster and synchronised, new product / pack/ promotions roll outs
• 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.
I ‘own’ my relationship with the
Trade, by directly servicing them.
Will this get diluted?
Do I have to part with extra
margin?
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
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.
 FAQ’s - Brand owners perspective
Question
Aren’t we putting all eggs in one
basket?
How do we protect sensitive
information? Will you be handling
competing products?
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.
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 intra-
city)
• 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