The Key to Success in Building a Distribution Business

The key to success in building a distribution business, management, and corporate governance are important weapons to win the competition. Not a few businesses have been significantly affected by the ongoing pandemic. But on the other hand, there are also businesses that recycle profits because of this pandemic. One of them is the logistics business. When human activities are limited, the need for home delivery becomes very crucial. Not surprisingly, the number of shipments of goods during the pandemic skyrocketed. Not only secondary and tertiary goods, even basic necessities including fast-moving consumer goods (FMCG) are very commonly purchased with the concept of home delivery.

The above conditions also encourage the growth of new business fields such as distribution. The need for speed and ease of arrival of goods on time makes new distributors appear. The scale of the business also varies, ranging from small, medium-scale, or expansion of large companies.

However, business competition should still be the concern of every businessman. The development of management and corporate governance is an important weapon to win the competition. Check out some tips for building a distribution business

  1. Conducting Market Research and Analysis Periodically

It is very important to do a lot of market research as a basis for making decisions before and while running a business. Research is not always in the form of paperwork which is heavy, but more to the observation of competitors, customer needs to new challenges that must be faced. The market is an important factor because the existence of a market will determine the direction of the product to be distributed later. If the market is right, then the product will be distributed to the right target as well. If this happens, then the product turnover will be smooth and a smooth business as well.

Good use of data is also part of market research and analysis. Data is the basis for decision-makers.

  1. Determining the Right Distribution Chain

The right distribution chain is the most crucial point in distributing goods. The simpler the distribution chain, the more efficient the business will be. A long and convoluted distribution chain will increase costs and add to the management work. Basically, distributors are the first hands to distribute products from producers to retailers or final consumers. Margin is generally obtained from price discounts from producers to final consumers. The more types and quantities of products distributed, the higher the discount.

Distributors must purchase products, store products, classify products to transport products to the final retailer. Even distribution companies include parties that can convey information about all things related to products and carry out product promotions.

All of these capabilities are applied to form a product distribution chain. In the end, the distribution chain is a series of activities that will ultimately be related to the whole process of distributing goods. The distribution chain is also defined as the activity of moving and distributing goods or services from producers to consumers. The chain includes various things ranging from the type, price, quantity, and place needed. Of course, the distribution chain can be different in each location and type of goods, this is what requires the attention of distributors.

Source: freepik.com

  1. Check Inventory Carefully

A good distributor must be able to guarantee the availability of stock in the warehouse, both in terms of quantity and quality. The existence of goods in the warehouse greatly determines the availability of market goods, which greatly determines the credibility of the brand. Delivery delays can make competitors’ products chosen by consumers, especially for fast-moving goods. On the other hand, the control of goods also involves the expiration date which greatly determines the quality of the product. delay in delivery that causes your item to expire. Create an inventory system with sufficient technology to find out the amount and need for goods in real-time.

  1. Monitoring Cash Flow

Financial management is basically a determinant of the success of any type of business. In the distribution business, this becomes very crucial because the payment system between distributors and retailers can be different for each product or manufacturer. Use of supporting technology It is very important that all invoices and receivables and other business obligations are complied with on time.

 

  1. Build a solid Salesforce.

It is undeniable that the sales force or sales force in the field is the cornerstone of the distribution of goods. They do not just bring goods to retail, but also build strategies and establish good relationships with retailers. The sales force is also required to be able to read market conditions, develop the market and make reports as the basis for making management decisions.

For this reason, the management of the sales force has always been an important element that management must concentrate on.

The sales force also needs to be supported by digital applications that make it free to move without being burdened by many complicated reports like other elements.

Fast Moving Consumer Goods Industry Distribution Model

Fast Moving Consumer Goods (FMCG) is an industry that covers all daily needs, both commodities, and non-commodities whose interests cannot be replaced by other goods. FMCG products usually have a relatively short shelf life or expiration date, due to their perishable nature. In Indonesia, there are at least four categories of FMCG products, namely home care and personal care, food and beverages, cigarettes, and alcohol. Home care and personal care include products for home and personal care, such as cosmetics, toiletries, cleaning tools, clothing, and so on. Meanwhile, food and beverages are food and beverage ingredients that can be consumed directly or must be processed first, including sugar, coffee, tea, milk, instant noodles, and biscuits. The development of the FMCG business has pushed its supporting businesses to move forward, one of which is the distribution model.

How is the development of the FMCG business in the country?

The development of population, shifting behavior patterns and the proliferation of FMCG producers make this industry very dynamic. Consumer demands for the availability of fast and quality goods make these business people more creative and innovative, not only in terms of production but also in terms of marketing. Now, the marketing channel has also widened with the presence of digital platforms that make FMCG the same as other products. No wonder there are many housewives who buy soap, soy sauce, and even cooking spices through online shops.

Statista.com said that as of the third quarter of 2020, the FMCG business in the country rose 8.8% (YoY) with a percentage of 19% of total household expenditure in Indonesia. Meanwhile, the biggest trade/market is still in traditional trade. During the pandemic, the FMCG industry barely had a significant impact compared to other business sectors.

The wider the target for the distribution of a product, the distribution of its supporters must be more spread out. Not surprisingly, the distribution business in the country is one that has survived even though the pandemic has hit.

Then, what is the FMCG distribution model in Indonesia?

With the traditional market as the largest channel, the FMCG distribution model in Indonesia still relies heavily on the sales force. Traditional channels here, do not mean traditional markets, but also grocery shops, stalls, and even street vendors. Salesforce not only acts as an intermediary between producers and consumers but also builds relationships and partnerships between producers and wholesalers/retailers/retailers.

Before reaching wholesalers or retailers, the distribution process has actually started from the warehousing. First, the product enters from the supplier, when the product enters the company, it means that the product flow in this warehouse has entered the receiving activity. When removing products from the truck to the docking area, the admin has a role to match the quantity and type of products that come with the purchase invoice. The next activity is storing which has some activity details such as storing products into a stack. The whole process is often called inbound logistics. The last activity is shipping, which is the entire process related to shipping goods to wholesalers or retailers and is often called outbound logistics.

Wholesalers in Indonesia are known as large wholesalers and small wholesalers. The difference is determined by the size of the coverage area and its turnover. Likewise with retailers or retailers. Modern retailers such as minimarkets usually have their own distribution company to streamline costs and make the prices of their goods more competitive.

As the largest archipelagic country in the world, there are many challenges for FMCG distribution in Indonesia such as creating strategic distribution points, collecting and analyzing large volumes of reports, evaluating and predicting sales, and selecting operational management applications that can accommodate all geographic and management challenges. . These challenges require individual solutions. To answer these challenges, a digital system or application is needed that can run and monitor all distribution functions.

With the development of digital technology, all problems of FMCG distribution in Indonesia can be overcome. Scylla, Pronto, and the service desk from Prathesis answer all distribution problems with systems that are integrated with each other. This system supports all business activities from sales, inventory, customer handling, accounts payable, delivery to financial reports.

All data is processed and integrated, using a cloud-based platform. The use of the cloud itself is actually often done in everyday life, although it has not been widely realized. The cloud-based platform was chosen because companies do not need to provide servers and storage and think about maintenance costs. In addition, cloud platforms are easier and more affordable than those having to manually integrate data.

Appropriate, Fast, and Efficient Distribution Strategy

Fast-moving consumer goods (FMCG) companies need the right, fast, and efficient distribution strategy. Manufacturers need distribution so that products from producers can reach consumers safely. Although it looks simple, in reality, the process of the FMCG product journey from producer to consumer is complicated. Therefore, a good distribution strategy is needed so that the product reaches consumers well too.

The following strategies can be applied to make business activities more satisfying:

Choosing the right distributor

The first strategy, of course, is choosing the right distributor. Because the right distributor will work according to the target even the vision and mission of the manufacturer. Choosing a distributor that fits the producer’s target market will make the producer’s job easier. Manufacturers only need to submit the product to the distributor, to be further managed by the distributor.

Using supporting software

Doing distribution, especially on a large scale, there is a possibility that producer companies will experience problems in managing the process. Software like enterprise resource planning (ERP) or Scylla Enterprise will make monitoring easier. This business software can help manage the distribution process more effectively and efficiently. The way it works is to connect related divisions. This software also integrates a reporting system. Distribution and all the processes can run smoothly, safely, and accurately.

Distribution via website

One of the facilities in the digital era is the existence of a website. Websites can be used for product distribution. The trick is to include all the products in your company on a website that you develop yourself or through a third party. Take advantage of SEO techniques. Use SEO services for several months so that your product is easy to find on search engines. Please note, the level of competition in search engines is tight because it competes with products offered in the marketplace. Therefore, when there is a new product, do intensive SEO optimization.

Define distribution area

As a manufacturer, you must determine the right distribution area according to the company’s products. Understand the behavior of your consumers and map where they are. Do a survey so you know which areas have the most demand for your product. Start in the nearest area and focus on the local area. After the local area has been met, then you can expand the distribution area.

Prepare the means of transportation

One of the main factors for successful distribution is the availability of adequate means of transportation. You have to determine the right means of transportation. Adjust to the location of the distribution range and calculate the cost. Choosing the right means of transportation will make distribution smoother and costs less.

Maintain good relationships with distributors

It could be said, the distributor is the most decisive party in your business. It’s useless to have a quality product that many people need if it can’t be distributed properly. Therefore, maintain good relations with distributors. Especially if you have got the right and appropriate distributor. Keep in touch. Report daily work changes and progress.

Those are some of the right distribution strategies, to optimize the delivery of your products to consumers. Don’t forget to evaluate the sales results and performance of distributors on a regular basis. The goal is to find out how far your business has grown while working with the selected distributor. Also, to determine the next step in selecting a more effective distribution strategy.