Different distributor management approaches in the consumer products industry and how SAP can support
Are you in consumer products industry and did you ever come across the topic of distributor management?
I see it continuously popping up in my conversations with CP customers. I recognized that there are many different contexts, scenarios and business models and that the different scenarios require different types of support. Let me share my findings.
Many times the discussion starts in the context of emerging markets where traditional trade dominates. Small to medium-size distributors sell the goods of the CP brands to kiosks and mom and pop stores. This so called ‘secondary sales’ model is the predominant business model in emerging markets with up to 60% to 90% of total sales for CP companies. Even multi-tier distributor scenarios are common.
In contrast, in mature, modern trade dominated markets, CP companies manage the majority of sales directly with retailers. Nevertheless B2B transactions with (mostly medium-size to large) distributors are an important part of the business. A special situation we see in Japan – although modern trade dominates, big wholesalers (Oroshi in Japanese) are in control of the relationship with all retailers, big and small, across sub-segments. They are part of almost any transaction with retailers, except some fresh food.
For all these different areas of business with distributors CP companies increasingly expect optimal business support with business process software solutions to help increase revenue, minimize cost to serve and increase distributor satisfaction and service quality. To help enable CP companies realize these benefits, SAP offers a variety of business process software solutions.
First, the customer collaboration scenario in SAP’s Supply Network Collaboration (SNC) adds tremendous value if CP companies primary objective is to cooperate on collaborative forecast or replenishment in the supply chain. It will allow CP companies to efficiently plan and execute distributor requirements and collaborate in automated end-to end processes for joined forecasts and faster order cycles with greater efficiency and reduced inventory.
Or, if CP companies are focused on online information sharing, providing product catalogs and an ordering tool for their distributors, SAP offers Hybris Commerce. The solution offers the CP company’s distributors advanced personalization and targeting, self-service, optimal search and navigation and helpful product recommendations. While the distributor buyers enjoy rich functionality and personalization, CP companies maximize loyalty and revenue.
CP companies might also be interested in receiving inventory data, sell-out data to retail outlets, returns, trade asset information, audit data or similar from their distributors to increase transparency to the last mile and to avoid out-of stock situations. The SAP solution to support this case is
SAP Demand Signal Management (DSiM). DSiM collects and harmonizes external data across different data sources and makes the data available across other business and analytics processes in marketing, sales, supply chain and more.
Finally, there is one specific case in secondary sales in emerging countries, especially in APJ and Africa. In these regions, small distributors typically work exclusively for one CP company with a strong relationship with this CP principal. In that case the CP company often provides an ERP system to the distributor for its’ daily business operations, mainly for sales, logistics and finance processes like sales orders, pricing, inventory management, goods movements, invoicing, accounts receivables. In this case, the SAP solution is SAP Distributor Management for Consumer Products.
The solution consists of a central SAP ERP instance in a private cloud, set-up as an ERP Retail system and owned by the CP principal. All individual distributor companies access this central ERP system via the Internet to manage their daily operations. This is possible because SAP ERP is a proven scalable, multi-language, multi-currency system complete with extensive access control and authorization security. Use of this kind of solution provides a competitive advantage for the CP principal by helping to enable full visibility and real-time analytics of the distributors’ business with their retail customers. This real-time transparency enables faster and better business decisions.
What is your distributor management strategy? Please share your experiences, perspectives and best practices!