Best practice to your supply-chain. How to boost productivity and reduce costs. With several tips for developing & optimizing your network of distribution.
Written by Mr. Manuel Wieder, developer and founder of Cap2Move closure caps. A “Start Up” from Austria.
Your distribution strategy impacts indeed all of your supply-chain participants including taking care of their different processes, from getting the raw materials, manufacturing the goods, establishing the distribution channels, organizing the logistics and transportation, activities to wholesale and retailers, stores and finally the consumer who gets your provided service or product. It influences everything that has to be observed and attended by a harmonized marketing strategy to make your business known and work.
„The general question is: How cost-effective, flexible and service orientated is your strategy at all?“
8 typical questions should be answered to develop an international distribution plan:
- – Where you want to go with your product or service?
- – Which markets are relevant and what is their behavior?
- – What distribution channel can be chosen and operated?
- – Should the manufacturer be located at the same area as distribution?
- – How many distribution centers do you need globally?
- – Where ́s the peak to optimize the costs for it?
- – Which strategy can you imagine to minimize the costs of transportation?
- – How to increase revenues and the level of service on both sides’ expectations?
The Major steps required are:
1) You need to know your demand volume for serving the chosen customers by country. This you probably just can get by an one year database about orders, shipment, costs and time for serving the distribution channel.
2) Know your points of entry the new market. By a vendor master file you will get an orientation what ́s best about. Is it by Air, Land or Maritime? What ́s the pro and cons.
3) Evaluate your distribution channel continuously. By inventory-history, e.g. packaging, weight, stock strategies and time to maintenance.
Adequate focus on the financials, understanding of working capital invested, will let your studies end up in a mind blowing processes. There are many multiple software applications on the market that help you to determine and observe the process. Start-Ups don ́t have such
possibilities and data files and so they face a fundamental challenge to prepare and analyse their processes. Even without such informations you can solve and manage the challenge. Include the carrier, an import-export firm and involve the local distributors requirements, to get a basic organization for to let it grow steady during time of business. With these simple thoughts you can do a basic planning, organize a process and handle the complexity of a supply chain and give it a transparency.
Once a model is established and validated, those tools and sheets can efficiently measure the impact on many unconstrained and constrained scenarios. That’s good to measure trade-offs between level of service and identify points of interest and cut costs. But most of the work has to be done outside these tools by your team of management. Analyse, preparing and improve is a continuous process in your company. Once you ́ve started it, it should never be stopped. As an international distribution strategy for emerging markets, a good structured distribution channel strategy enables you to sell to consumers in geographically areas or markets that your direct sales team can ́t reach.
If you decided to enter those markets and grow your business internationally, you have to identify and analyze this market(s) accurately. Find distributors or retailers that are interested in your product or service, providing existing coverage of the chosen territories. If you are willing to export, focus on experienced distributors, importers who have detailed, local knowledge of the target market. This will give you an almost ready-made platform and structure for your expansion you can build up and follow.
Without an already existing network, you will have to invest time and costs for setting up your own network or direct sales operations. Take care and compare costs of resources to order processing, stockholding, delivery and transportation fees, invoicing and the customer service locally. Expenses will rise significant depending on quality and standard of your product or service provided to your clients and customers. Focused on a longtime business connexion it ́s a task, how lower margins compare to the probably needed discounts to distributors for providing a similar level of service to the wished consumer expects.
Our advice is to concentrate on reliable distributors that give you the chance and access to an additional base without direct sales and huge costs for marketing to make your entry and process flow. These distributors can provide you next to proven knowledge of local markets with their behave of it, without incurring heavy costs for market research and entry the foreign market. Support and control are very critical factors for your success. Monitoring the performance and identifying their needs, helps a lot to deliver a great service, proven standard and rank you higher in their list of partners. Furthermore the use of channel partners allows you to concentrate on your key accounts plus to deal with a large number of smaller customers. So the costs are effectively.
Facing the future of growth efforts to maximize the audience and hopefully your revenues. Therefore small companies and Start-Ups have to:
- – Develop and design a customised distribution strategy and plan. For this, they must understand the goals and priorities, identify the needs and expectations of their core audience, partners and consumers including their behavior.
- – Determine the possible distribution channels and release sequence. Their strategy also has to be flexible, assessed and redefined.
- – Their strategy has to adapt to your marketing planning and activities to reach effectivity by efficiency.
A tactic for unexperienced firms could be: 1. Split distribution rights
All parts of your supply chain have to work in balance to promote your product or service right. Several departments with their functions must be synchronized to get the effort information spread to achieve the aimed topic. A verified Network can aim and work way more effective and efficient on the consumer needs than a newcomer ever could.
2. Chose effective distribution partners
It ́s very important for success to think about and respect what distribution efforts, what distributors can handle themselves and what should be outsourced. Probably you can get some good advice or some example from other, bigger firms, information about solving the problems they had or how the marketed their products and services.
3. Circumscribe rights
Only give distribution rights, permission to partners they take care of and handle well in conduct of corporate identity. Make sure the rights given to several partners comply and don ́t conflict with each other.
4. Identify Win-Win Deals
Identify or develop deals that will fit both sides’ expectations and work for both sides easily. Divide revenues fairly and define responsibilities clearly structured. What brings both an advantage on margins without wasting resources, but builds up potentials what can be harvested together.
5. Retain the right for Direct Sales
Domestic and international rights to sell the products and services should be retained. e.g. B2B and B2C
6. Build and develop a distribution team
As a supply chain team, leader, it ́s important to observe the process and keep it fit to superior targets of your strategic management assessment. Ideally your team should start thinking about distribution at the very beginning of your journey. Keep in mind, a strategy is never craved in stone, you should always have a backup plan or some alternatives in evidence.
On a global market the global impact must always be considered in its changing supply chain. This could be as minor as a domestic consumer wants direct shipments to an international location or as major as an acquisition by a global company or addition of a global key account. Customer service may need to operate 24/7 mode to assist customers in all time zones. To be well prepared “theoretically and practically” – is the critical element in a global marketplace to find applicable actions and alternatives.
If you ́re not a global player yet, your success will drive you into that sooner rather than later. However, planning and following a crafted method can figure your distribution to be fit and efficient today and flexible for tomorrow so it is able to handle and achieve the changing requirements by going forward with your expansion.
Good luck and all the best for success,
Manuel Wieder – Developer & Founder of Cap2Move