If your Distributors account for say 30% of your FMCG business then they need to be an intimate part of demand creation and measurement or you are simply giving business away to competition. McDonalds make most of their sales inside the restaurant but do you think they pay less attention to the smaller Drive-In sales demand?
However simple or complex your business you need a tool to capture market demand at Distributor level. (Let us assume the Producer has a suitable in-house S&OP to consolidate all demand signals into one number across all sectors!) The tool does not have to be sophisticated but it has to be agreed between the parties as the only reliable indicator of expected demand for the period. I am not suggesting that the Distributor presses a button, sends in his Demand Forecast and that is the end of debate. It should be the start of a two-way discussion based on shared data AND decision making to agree a deliverable sales plan leading to an internally deliverable supply plan.
Ensure Demand Forecasts are under-written by staff with direct trade interaction and experience and while no demand forecast is ever perfect you will not go far wrong. Consider how powerful it is to have a good Demand Forecast with the stamp of the Distributor AND the Producers Sales Rep. No double guessing, no hedging and no pointless debate after the month end. Sure, there will be differences to talk about but as market assumptions are agreed in together in advance then at least you have a basis for discussion about what went wrong and how to improve for next month.
As ever, monitoring is important as you cannot improve what you do not measure. The Distributor should be monitoring his demand forecast accuracy at SKU level. Ok, if you have a few thousand SKUs this might cause a drain on resources but you can monitor those key SKUs which drive the business. "If SKU X is out of stock we do not worry but if SKU Y is out of stock then it ripples all the way through my own business and into the Producer." The earlier a variation in demand signal (up or down) is transmitted to the producer, the better for all.
Lastly, the old chestnut of promotional activity. If you really are working in close collaboration with your Distributor then you will already be discussing the timing and effects of trade and consumer promotions. However, I consider this a rarity in Romania. Not only should this discussion include Distributor activity but be honest and brief them on parallel activity with Key Accounts and C&C etc. If the Distributor really is your partner then he needs to know what else if happening on his patch which is likely to impact his own and therefore your sales.
Move on from "you did not sell what you said you would" to "OUR Demand Forecast was good last month but let us see how we can make it even better". This simple mind shift can add to your bottom line without the need for investment.
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