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2012 Distributors Network Model
Dumex Vietnam Route To Market 2012 Distributors Network Model
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From Vision to Action 2011-2012 Layer 2010 Danone Distributor
Vietnam 05 Distributors 82 S. Distributors RETAILERS Distributor S. Distributor Retailer
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2011-2012 “Transition Phase” Management
Potential Risk Key Points to Manage Loyalty / credibility of current Distributor / Sub-Dist. Massive termination distribution contracts of sub-distributors Identify potential Distributor candidates who are qualified & exclusive for Danone Sustainable growth Field Sales force cost increased. Fully transparent to avoid rumors and fears. Prepare a positive communication of the new chosen model. Make up plan of Dist. to play a role of Sub-Dist. Build the selection process to assess & select right Dist. Carefully explore all the hidden cost for all scenarios. People, process and tool to facilitate
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Pilot “Direct From Distributor” model
1 May 24th Territory (pilot) 2 Jun 15th Map Universe vs Actual Stores Provision Store (incl. Dumex) DRC Ideal Route Planning 3 Jun 15th Simulation of Resources Required # Salesman # Vehicles Routing Plan per Cluster/Channel Delivery: * FTE * Cost to serve 4 Jun 15th Audit As-Is Picture of success compliance OSA Uncovered Stores Delivery: $$ missed opportunity of Existing Model Jul – Aug 5 Pilot 6 Sep 1st
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Pilot run in Nhatrang city on progress with clear KPIs
Resource Simulation – Staffing model
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Criteria of setting the territory
Cao Bang Lao Cai Lai Chau Lang Son Son La Yen Bai Tuyen Quang Bac Kan Thai Nguyen Phu Tho Vinh Phuc Ha Noi Bac Giang Hoa Binh Ha Giang Dien Bien Bac Ninh Ha Tay Area (Km2) Population Income Total FMCG Sales 2008 Transportation Radius distance (max) Dumex Sales Contribution Potential Growth Potential outlet coverage Quang Ninh Hai Phong Thai Binh Nam Dinh Ninh Binh Hai Duong Hung Yen Ha Nam Thanh Hoa Ha Tinh Quang Binh Nghe An Quang Nam Quang Tri Da Nang Hue Binh Dinh Phu Yen Kon Tum Gia Lai Quang Ngai Dak Lak Dak Nong Ninh Thuan Khanh Hoa Binh Thuan Lam Dong Dong Nai Ba Ria - Vung Tau Binh Phuoc Tay Ninh Binh Duong Ho Chi Minh Kien Giang An Giang Long An Vinh Long Dong Thap Tien Giang Ben Tre Tra Vinh Can Tho Soc Trang Bac Lieu Ca Mau Hau Giang
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Parameter to show the % contribution of FMCG Sales for each stage
Option 1: 06 Distributors directly Sell to retailer in nationwide 62.2% 70.2% 76.5% 95% 100% Ha Noi Ho Chi Minh Da Nang Can Tho Nha Trang Ha Giang Cao Bang Lai Chau Lao Cai Tuyen Quang Bac Kan Q1/11 Dien Bien Yen Bai Thai Nguyen Lang Son Son La Phu Tho Vinh Phuc Ha Noi Bac Ninh Bac Giang Quang Ninh Hai Duong Hoa Binh Ha Tay Hung Yen Ha Nam Thai Binh Hai Phong Ninh Binh Nam Dinh Thanh Hoa Q3/11 Nghe An Ha Tinh Q4/11 Quang Binh Q1/12 Quang Tri Parameter to show the % contribution of FMCG Sales for each stage Hue Da Nang Quang Nam Quang Ngai Kon Tum Binh Dinh Gia Lai Phu Yen Dak Lak Q1312 Dak Nong Khanh Hoa Binh Phuoc Tay Ninh Lam Dong Ninh Thuan Binh Duong Binh Thuan Dong Nai Dong Thap Long An An Giang Ho Chi Minh Tien Giang Ba Ria - Vung Tau Vinh Long Ben Tre Kien Giang Can Tho Hau Giang Tra Vinh Soc Trang Bac Lieu Ca Mau
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Option 1: 06 Distributors directly Sell to retailer nationwide
AMS_AM0000_yyyymmdd_name From distributor’s points of view Assumptions Keep the same 06 distributors & territories. Distributors have to directly sell to retailers in 20 key cities. Distributors have to set up DC in the rest small provinces. Risky in cash collection & credit to retailer. Out of control due to big territory (>10 provinces) because in every DC they must have the reliable people to manage. Focus on big cities only. It’s hard to achieve the objective of “direct from Distributor” in Nationwide
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Option 2: Implementation Plan 2011-2012
Distributor sales: 0% Sub-distributor sales: 100% Distributor sales: 67.3% Sub-distributor sales: 32.7% Dist. sales: 100% Sub-dist. sales: 0%
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Option 2: 12 Distributors directly Sell to retailer nationwide
From distributor’s points of view Assumptions Re-allocate from 06 to 12 territories 01 territory has key cities to cover other small provinces – Hub and Spoke Distributors have to cover all assigned provinces or nothing Be able to manage cash collection & credit to retailer Be able to control b/c the acceptable size of territory Acceptable costs for DC & manpower requirement in small provinces Be able to retain current / recruit new distributors as our “direct from Distributor” target with an acceptable size of territory
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Option 2: Implementation Plan 2011-2012
Cao Bang Lao Cai Lai Chau Lang Son Son La Yen Bai Tuyen Quang Bac Kan Thai Nguyen Phu Tho Vinh Phuc Ha Noi Bac Giang Hoa Binh Ha Giang Dien Bien Bac Ninh Ha Tay Quang Ninh Hai Phong Thai Binh Ha Nam Nam Dinh Ninh Binh Hai Duong Hung Yen Thanh Hoa Nghe An Ha Tinh Quang Binh Quang Nam Quang Tri Da Nang Hue Binh Dinh Phu Yen Kon Tum Gia Lai Quang Ngai Khanh Hoa Dak Lak Dak Nong Ninh Thuan Binh Phuoc Tay Ninh Binh Duong Binh Thuan Lam Dong Dong Nai Ba Ria - Vung Tau An Giang Kien Giang Long An Vinh Long Dong Thap Tien Giang Ben Tre Tra Vinh Ho Chi Minh Can Tho Soc Trang Bac Lieu Ca Mau Hau Giang
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Sales Field Force
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Cause and Effect Analysis of Low Control…
Causes Effect Not transfer value & mission of Danone Not clear career dev. Low salary & KPIs achievement Low salary, Limit of SF cost margin, Less training Less motivation Image of dist. & working environment 3) Not loyalty & Less Danone’s accountability 2) High turnover rate 1) Un-qualified people Low Control 6) Follow the execution way of distributor 5) Insufficiency of toolkits & standards 4) Old mindset & Adapt capability Communication & KPIs alignment Not equipped enough Paid by distributor & under distributor
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Solution (take back or imp.)
Cause and Effect Analysis of Low Control… Factors Causes Importance Ranking Importance Weighted Solution (take back or imp.) Unqualified people Low salary (limit of SF cost margin) Under distributor headcount Less training Working environment 1 40% Improve Partially T.B High turnover rate Low salary KPIs achievement 2 20% Old mindset & Adapt capability Communication KPIs alignment 3 15% Follow the execution way of distributor Paid by distributor 4 10% Not loyalty & Less Danone’s accountability Not clear career dev. Less motivation Not transfer value & mission of Danone 6 Insufficiency of toolkit & standards Not equipped enough 7 5% 60%
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Why we want (nor not want) to control?
Cause and Effect Analysis of Low Control… Who Who we want to control? Why we want (nor not want) to control? Salesman No Credit control/Trust of distributor High turnover rate PG Yes Key sales driver at shop and convert consumer fr. competitor Nutrition advice to consumer Excellent execution of Picos in key store In store promo execution Get supports of shop owner SS Control execution of salesman with Danone’s expectation Provide training & coaching for salesman Tracking daily sales activities PS Control execution of PG with Danone’s expectation Provide training & coaching for PG Tracking daily sales activities at key shops (DRC) ASM Lead the sales Team to achieve the targets Manage & improve performance of distributors together with building relationship with them Manage the market & customer Provide directions and solutions Motivate the wining spirits of the sales Team Admin Support in building the Sales Information system
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Headcount Options Implementation Plan 2011-2012
Reimbursement salary & incentive by Danone is a option to improve the control… Current Sales Force Cost (4.6% on GS) Structure including: Salary: ASM, SS and PS: 1.0% Salesman: 1.2% PG: 1.2% Sales Incentive (KPIs): ASM, SS, Salesman and PG: 1.2% Hidden costs need to be verified: Logistic cost from Sub-distributor to retailer (includes DC/branch in the remote areas) Others costs related departments of Danone such as Sales, HR, SC and Finance…
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Sales Organization Options
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Sales Organization Options
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Sales Organization Options
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Current Cost Structure
100% Distributor Gross Profit Net Profits % Discount / Rebates to SD Business Income Tax Interest expenses Admin overhead Logistics Staff overhead Local Promotion Stock return Total Trading term: 15.9% + Basic margin: 12% + KPIs: 3.9% - Primary sales: 1.7% - Secondary sales: 1.2% - Weighted distribution: 0.5% - Purchase outlets: 0.5% 0.70% 0.90% Sales Force %
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Distributor Management Roadmap
Select the best Distributor Establish the Contract Set up the network Manage the distributor “Distributor Activation” How to select the best distributor? Potential candidates Expectations and benefits Assessment What to write in the contract? Mutual commitments KPIs Trading conditions Respect Danone guidelines How to start successfully the business? Connectivity Distributor responsibilities Distributor manager How to motivate and control the distributor? Understanding financials Motivation Business planning KPI’s
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Change the roles and Responsibilities of Distributor within Opt
Control Cost
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Change the roles and Responsibilities of Distributor within Opt.6
Control Cost
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Change the roles and Responsibilities of Distributor within Opt.4
Control Cost
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What’s the key responsibilities of Distributor?
Perfect implementation of the service package Service package scenarios to be analyzed later P&L simulation impact…
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Expectations: “Must have” criteria
Exclusivity for Danone categories Danone must represent at least 30% of their business Ability to achieve specified coverage (geographically, by channel, etc.) (But no full country coverage with one single distributor) Data sharing / IS capability / PDA & DMS cost sharing Give a permanent access to their processes and people (according to local regulation) Need to grant Danone supervisors a permanent access to inventories, invoices, pricing conditions, fleet, people The cost to serve and value chain analysis Quality of there is/IT systems and logistical infrastructure and their ability to manage the cool chain (Dairy) and general quality controls and traceability Respect of WISE &WHO requirements
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“Selection” criteria Financial performance
Capacity to invest to follow Danone growth Willingness to adopt to Danone standards in the future Customer service performance Supply chain coverage, scalability & efficiency Ability to support quality standards Attitude to work with Danone Professionalism of their management and staff Knowledge of market, customer base and quality of customer data Relationships and alliances with key customers Credibility in the marketplace and length of time established WISE & WHO compliance
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Roles and KPIs of Distributor Manager
Managing the Distributor CANN growth Operational efficiency Returns Service level Distribution costs Payment behavior Distributor Manager Weighted Distribution In-store execution Managing the Market Managing the Relationship Business planning P&L improvement Training and information Sales Force motivation
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From individual selling
And change to the new way of working... From individual selling To Team selling Sales Operations Marketing Finance / Systems Distribution The Distributor Danone ‘Distributor’ Principle Distributor Manager Sales Operations Marketing Finance / Systems The Distributor Danone Distribution ‘Distributor’ Contact Manager
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Developing the long term relationships with Distributor
AMS_AM0000_yyyymmdd_name Trust Biz Partnership Co-operation Consolidation Competition / Confrontation Relationship 2008 2010 2011 2013 onwards Timing
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