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?

10 Dec 1941:

Prince of Wales & Repulse, without air-

support, sunk by Japanese bombers off

Kuantan

The Japanese road bicycles through Malaya’s

“impenetrable jungle and mangrove swamps”

In fact, Malaya had SE Asia’s most developed

road network.

It was built by the British

Allied defence was a management failureThe primary cause: Mindset Inertia

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?

Distributors with the will

(mindset), competency and

tools to manage their

business effectively –

continually tracking (and

reporting on) sales and inventory performance

Salesmen trained

and equipped to

be effective and

productive at the

point of sale

Manufacturers harvesting

real-time data – and having

the analytical capability to

use it to effectively drive

growth through well

coordinated sales and supply

chain operations

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!

……

Outlets Pasar Mini EffisCategory: Convenience

Contact: Mr. Tan 0122345678

Sales Performance

Cost-To-Serve

Demographic

Points of Interest

Geographic Information Systems (GIS)

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

– 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

Cost to serve reporting

If we have CTS by outlet, then we have it by…

By salesmenBy sales territory

By distributorBy sales region

Nationally (with apologies to EM)

Pasar Mini EffisCategory: Convenience

Contact: Mr. Tan 0122345678

Sales Performance

Cost-To-Serve

Demographic

Points of Interest

Upper tier

Middle tier

Lower tier

Average household incomes

Geographic Information Systems (GIS)

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 quarterly for each distributor

Example 2: Review of 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

Manuf. 1

Manuf. 2

Manuf. 3

Manuf. 4

Pasar Mini EffisCategory: Convenience

Contact: Mr. Tan 0122345678

Sales Performance

Cost-To-Serve

Demographic

Points of Interest

Sales Collaboration: Outlet performance vs. peers

Distributors

Manufacturers

Outlets

Manufacturers’ DCs

(increasingly operated by

3PLs) directly replenish distributors:

• Intermittent deliveries

• High inventories

• High storage costs

Despite high inventories the most common cause of underperformance is

Missed sales due to stock-out at distributor

Outlets suffer poor service

and look elsewhere for product

Logistics Collaboration: Today’s structure

Logistics Collaboration: Tomorrow’s structure?

Distributors

Manufacturers

Outlets

CROSS-DOCK

2) Send one bulk order to each DC

Daily scheduled delivery

(multi-product) to each

distributor

Reduced or zero

inventory

Improved service & availability

Bulk pick of single order

FTL delivery to cross-dock

1) Generate daily replenish request via VMI process

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