The offline distribution industry is a tough industry and profit margins are slim. The attributes such as market competition, inventory management, and the complex nature of the supply chain have specifically created a tough environment for brands and their channel partners.
To navigate through these complexities, a distributor needs to properly identify tools and gain insights that can help him to evolve, adjust, and distinguish his distribution operations amidst this competitive landscape.
Below are the major distribution challenges that can turn out to be potential obstacles in the distributor as well as the brand’s downstream supply chain operations.
We have also attempted to explain how a DMS can become part of the solution that solves these problems.
Let’s explore the challenges and ways to overcome them.
1) Inventory management
Managing inventory effectively poses a major challenge for distributors and stockists, particularly in the FMCG sector. Balancing between overstocking and stock-out situations is crucial, especially during peak periods and seasonal fluctuations in demand. Poor inventory management impacts the ability of FMCG companies to meet customer demands while reducing excess stock, leading to issues like product shortages, excessive inventory levels, and missed sales opportunities.
Solution
FMCG companies can solve these problems by implementing a full-fledged Distribution Management System (DMS). The DMS helps them keep track of how much stock lies at each distributor point and automates the process of replenishment. By using DMS, FMCG businesses can better control their inventory, making sure there’s enough stock to ensure product availability at retailer points.
2) Order fulfillment and tracking
CPG brands often face challenges in accurately tracking order fulfillment and matching billing with orders. This lack of tracking occurs when there is no visibility of the orders coming from retailers and the secondary billing done by distributors. Without organized tracking, managing returns and damages also gets difficult since it depends on manual methods that are prone to mistakes. Without a proper fill rate visibility, market demand may go unfulfilled and result in a loss of sales.
Solution
Implementing an Online Distributor Management System (DMS) offers FMCG/CPG companies valuable insights into their order fulfillment rates, enabling them to analyze billing differences and identify supply-demand gaps. It allows for a deeper understanding of unmet orders and sales opportunities across different product categories. The DMS simplifies the handling of returns and damages, streamlining tracking processes and maintaining records of damaged items. This approach minimizes errors and enhances customer satisfaction. Furthermore, integrating DMS with Sales Force Automation (SFA) features provides added value by allowing the field team to record orders digitally from retailers and send them to the DMS for distributors to fulfill. This ensures timely updates to inventory and order management systems, enhancing productivity and reducing processing time.
3) Secondary Sales Visibility
Before we address the challenge of achieving visibility of secondary sales, it’s important to grasp the concept. Secondary sales refer to transactions between distributors to retailers, it includes sales made by distributors to retailers following the initial sale from the manufacturer to the distributor. Since retailer-to-consumer sales (tertiary sales) aren’t effectively and completely trackable today, secondary sales become the nearest indicator of what is happening in the market. Lack of accurate secondary visibility hampers companies’ ability to understand customer preferences and buying patterns accurately. Without insights into secondary sales, companies struggle to tailor their sales strategies and trade marketing efforts.
Solution
Having a complete view of secondary sales means businesses can track all sales made by distributors, and other stockists to retailers in at least a near real-time manner. This helps brands understand what customers(retailers) like and how they buy, so they can adjust their sales plans accordingly. For instance, if a product is popular in certain areas or with certain channel partners, the brand can focus more on promoting it there. This information helps businesses decide how to manage inventory, run marketing campaigns, and develop product range, leading to higher sales and happier customers.
4) Pricing and Promotion
CPG brands generally struggle to control product pricing effectively. Distributors can change prices during retailer billing, risking market price manipulation. Apart from this, brands also find it difficult to automate secondary scheme creation and application, making the process more complicated. Without the knowledge of whether a secondary scheme is passed on by the distributor to the retailer, companies cannot understand accurate scheme utilization. There may be no guarantee whether the retailer has received the benefit intended for them.
Solution
Managing pricing with precision is achievable using DMS, which enables better control over the secondary bill. It simplifies the task of maintaining and adjusting prices across all channels since a DMS can integrate with your internal ERP. DMS allows companies to create secondary schemes that are automatically applied to secondary bills that the distributor creates. Also, it provides regular reports on product lines, channel partner performance, scheme usage, and market trends. These reports enable businesses to handle trade marketing, pricing, and schemes effectively. Setting realistic goals can also motivate distributors and sales teams to perform better.
Final Thoughts
In order to overcome distribution challenges, it’s important to adopt technology, use the right tools, and have a data-driven approach to analyzing and solving issues. A critical tool in enabling this goal is a robust Distribution Management System (DMS).
An Online Distributor Management Software becomes an important transactional system on top of which more sales automation solutions can also work.
