Supply Chain Blog

FMCG Route To Market (RTM) Distribution: Where did I put my keys?

Posted by Dave Jordan on Wed, Mar 26, 2014

If you are male and own a car then you will have spoken these words at least once! If you do not have a dedicated place to hang your keys then they will be surely be misplaced at some stage. You might miss an important event, football match or at the very least you will upset your spouse after complaining about how long she takes to get ready! Hold on a mnute, what has this got to do with supply chain, has Dave lost the plot?

Key to distributor management

How many sales have you lost business through Distributors not being able to find the right stock at the right time? You probably do not know the answer to that but I can bet it will be significant if the Distributor operates in a sub-standard warehousing operation. Sadly, this is still the norm in Romania, CEE and developing markets in general. Producers do not pay sufficient attention to how their valuable and carefully prepared stock is stored and handled by Distributors. Please do not misunderstand me. I am not proposing a cutting edge Warehouse Management System or narrow aisle reach trucks but a basic level of efficient operational warehousing is required to support professional producers.

Once the stock is inside the storage location you need to know where you put it - remember the keys? If racking is available then the destination location of each pallet must be recorded. No racking? Create a simple painted grid on the floor which allows you to allocate a particular space to a pallet or box or sack of product. (This also helps to maintain safety in the warehouse by isolating pedestrian and FLT routes.)

Above all else ensure there is a sensible level of security and no, I do not mean an internal team staffed with long term employees considered "part of the furniture". Distributors need to invest in a professional partner who has the training and authority to provide security for your stock. The key here is to continually rotate the security staff and prevent familiarity relationships developing. Like it or not but you need to have constant 24/7 checking of what is actually being loaded into trucks.

How many times have you faced large and unexpected stock losses at your Distributors whether through theft, damage or expiry? Even if they own the stock it is your lost sales! If you get the security aspect right then that might not be your biggest concern as Distributors are notoriously poor at applying stock rotation or FEFO/FIFO rules. You seldom get close to this end of the chain so you do not see it....until someone finds expired product on the shelf. At this stage it is your reputation at stake irrespective of any penalty clauses you can apply to the Distributor. Again, this does not have to be very sophisticated but there needs to be a basic routine to monitor stock age - pen and paper still works!

Finally, stock counting is a formal requirement in any business but this is seldom carried out properly, if at all. In any Distributor relationship you need to ensure cycle counting from day one in addition to the legally required annual counting. The rotational checking of a few sku's per week will reassure both parties that stock is under control and prevent an unexpected stock loss which has to be booked at the year end. Again, it is not just the financial consideration but if customers are ordering skus which are not in the warehouse then it is your lost sales once more..

Ensuring the Distributor applies some basic warehousing rules can contribute to a significant, positive difference to your stock outs on shelf.

(Me? My keys are magnetic and I stick them on the radiator as I enter the house! This alos make them nice and toasty in the winter.)

Success in distributor management

Tagss: Route to Market, Dave Jordan, CEO, Supply Chain, CEE, Traditional Trade, Distribution, Inventory Management & Stock Control