Business Lessons 07 Jan 20 Manoj Kumar

For the past decade, Fast Moving Consumer Goods (FMCG) industry has been very active. Since the industry is volatile, all businesses aim to retain their customers by investing in innovative and better techniques to provide a flawless experience to the end consumer. 

The journey of goods starts with companies and ends at end consumers. The companies are helped by distributors for selling their products all over the country.

With the growing demands in both urban and rural areas, the industry was booming but was, and still is, dependent on the FMCG Distribution Network. The industry comprises businesses that are responsible for distributing goods in vast quantities all over the country. Let’s analyze how this industry survived the transition of the humongous FMCG industry.

When FMCG Distribution tapped rural India?

 The population of rural areas of the country heavily outweighs one of the urban areas. So, when digital accessibility hit the rural areas, and people were introduced to online shopping, the demand for goods increased exponentially. The FMCG industry was slowly expanding into Indian rural areas.

FMCG market in rural and sub-urban India
Source: Statista

The graph represents the value of the FMCG market in rural and sub-urban India. It can be seen that the market value is increasing gradually every year but is expected to be valued at a whopping 220 billion dollars by the end of the financial year 2025.

With all things going their way, the FMCG industry was confident that it had tapped a hidden potential in the Indian rural and sub-urban markets. 

How does the FMCG Distribution Network work?

The network is headed by big companies that manufacture fast-moving consumer goods — for example, Dabur, Bikano, Jockey, etc. The companies aim to sell their products to the end consumers at urban and rural levels. So, to get their goods distributed, the goods are sent in bulk to super stockists i.e., personals that hold products in bulk quantities for transferring them to different distributors. The sales from companies to distributors are referred to as Primary Sales.

Now the distributor sells these goods to different retailers who further sell it to end consumers. The former process is referred to as Secondary Sales, and the latter is known as Tertiary Sales.

But what happens between the Distributor and Retailer?

Between the retailer and the distributor, people are working in huge numbers to make the network work. The chain is headed by a National Sales Manager who's responsible for sales on a national level. A large number of Zonal Sales Managers report to him so that he can keep track of national sales. Each Zonal Sales Manager heads a team of many Regional Sales Manager which further lead a team of Area Sales Managers. 

The Area Sales Managers hire a group of sales executives. The sales executives are responsible for selling the products to retailers. This sales team is referred to as the sales force of the distributor and hence, the company.

The process of automating tasks of this sales force is referred to as Sales Force Automation. In the FMCG Distribution Network, the need for Sales Force Automation is increasing rapidly. Sales Force Automation has led to a high rise in revenue numbers for multiple companies.

Is FMCG Distribution Network that smooth?

Though the network is expected to work very smoothly when we look from the outside, it is a tedious journey from the company to consumers. Let's take a look at the challenges that companies and distributors face regularly.

Inventory management by the distributor is a cumbersome task. It is highly unpredictable in terms of fast-moving consumer goods when you might need more goods, or your goods would get dumped. Also, distributors hold multiple products from multiple brands in various quantities. Hence, it is very tough to keep track of the inventory.

Another issue for the company is MRP control. The company, in the case of all products, marks the price of the product at which it is meant to be sold at every level from super stockist to the end consumer. However, distributors may charge higher rates from retailers because of retailers' lack of information.

Many times, retailers do not avail schemes launched by the company because the retailers don’t get to know about them.

One of the major problems is the tracking of damaged and returned products. Companies receive damaged products in return from customers every day, leaving the company a tedious task of tracking every product all around the country. 

Technology for survival:

The solution to most of humanity's problems is technology. Technology has helped the FMCG Distribution Network to steer clear in the storm of high product demands. A Distributor Management System solves most of the problems related to handling the FMCG Distribution Network.

A distributor management system comes integrated with software required for Sales Force Automation with a simple user interface that results in good user experiences. The interactive UI makes it easier for sales force working in rural areas to complete their tasks efficiently.

Conclusion:

The FMCG distribution industry, since in growth spur as of now, should invest in deploying technology into their business through a DMS

If technology is exploited in the domain of Machine Learning and Big Data with a DMS, the future seems to be very bright for tech in the FMCG distribution network. The technology would enable distributors to predict peak and fall times with utmost accuracy and precision considering their history in sales.

 In an era when insight-driven sales are a target of every company, a DMS would enable them to collect data and create strategies by referring to historical data. The future is based on automation, and FMCG Distribution Network should be prepared for it.

Manoj Kumar

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