This article discusses on how a network-enabled distribution system can help generate value and provide a competitive advantage to enterprises
Tough market competition with shrinking margins are forcing managers to scrutinize every aspect of their operation. It is increasingly getting harder to ignore the customer's on-time, every time demands. Needless to say, enterprises are looking at how a network-enabled distribution system can provide a competitive advantage while acting as a value generator and a catalyst for new business processes.
Today, the distribution network of an enterprise that serves the purpose of delivering finished goods and services to consumers, is coming under increasing scrutiny by the CXOs. One of the reasons being that the network has largely remained untouched by the various advances in the enterprise software technology. The key focus of enterprises has been on optimizing the internal business processes to maximize efficiency and plug revenue leakages, while producing goods. Hence, the growing adoption and popularity of enterprise software applications, such as Enterprise Resource Planning (ERP), Supply Chain Management (SCM), Business Process Management (BPM), Customer Relationship Management (CRM), etc. All of these enterprise software applications have converted a disconnected enterprise into a connected enterprise. However, enterprises have been slow to respond to the challenges of maximizing efficiency in delivering finished goods to grow customer base and increase customer engagement.
Over the years, the challenges in managing the distribution of finished goods have multiplied due to the emergence of specialist partners for logistics, warehousing, financing, after sales service, etc., and market place platforms that are driving the sharing economy. Given this, there is a need to connect various partners in the enterprise’s distribution network and empower the enterprise to orchestrate the business processes across the network, thereby maximizing efficiency of the network. Today, the network is the new enterprise.
The existing enterprise software applications have helped transform enterprises by providing these key benefits
- Real-time view of data across the enterprise, across regions and divisions
- Improved compliance to regulations
- Automation of core business processes
The applications are necessary and sufficient for an enterprise to optimize its business operations as long as the enterprise has a direct connect with the consumers. This applies to markets where the distribution networks do not exist or the same are controlled by the enterprise. For example, in the advanced economies like the G7, most enterprises do not have a multi-level distribution network, and the enterprise has complete visibility into the distribution and the consumer.
If there are multiple tiers of distributors involved, the enterprise is separated from the consumer by multiple degrees. Consider the challenges of enterprises in emerging markets in Asia and Africa that participate in open, multi-level distribution networks that are not operated by them:
- A large FMCG company that has more than 400,000 retailers in its best performing territory does not have a clue of the sales of its products at these retailers. It neither understands the demand nor the supply of its products to these retailers
- A perishable foods manufacturing company wants to minimize returns by closely monitoring the temperature of the refrigerators in the retail shops along with the inventory at the shop
- Another perishable foods manufacturer wants to minimize returns by redeploying inventory within its retailer network
- An FMCG company wants to implement automated inventory fulfilment across its distribution partners
- A tobacco company wants to track the sales and performance of the last mile delivery partners
- An FMCG company spends 100 hours every month on just tracking shipments to distributors and buyers
- A telecom service provider wants to track the distribution of SIM cards and recharge vouchers across its partners
And the KPIs/business goals that most of these enterprises chase are:
- Higher inventory turnover
- Minimize cost of sales and distribution costs
- Higher debtor turnover
- Eliminate stock-outs and returns
- Consistent product messaging and branding
These KPIs are heavily dependent on the business processes of the partners. It is not enough to optimize the processes within an enterprise.
Just as ERPs have transformed enterprises by connecting disparate functions within an enterprise, there is a need for a platform that connects all partners and “things” in a multi-level distribution network.