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Finding shelf space in emerging markets

Grantby ‎03-25-2014 09:40 AM - edited ‎09-30-2015 07:02 AM

iStock_000022003569Small.pngAs consumer packaged goods (CPG) manufacturers expand into emerging markets, many rely on distributors or wholesalers to provide crucial route-to-market capabilities. Those distribution partners may sometimes act as a wholesaler, taking title to the merchandise, while others act as a sales and distribution agent. Distributors can be dedicated solely to the CPG manufacturer, or may act as agents to multiple principals. Additionally, CPG manufacturers are likely to develop networks of distributors who individually offer widely disparate levels of technical capability and maturity.


Not surprisingly, these disparate networks pose significant management challenges to both the manufacturer and the retailer.


One way to conquer this challenge is to develop and deploy a Distributor Management Framework. To understand the challenge—and the solution—we sat down with Tony Galli of HP Industry Services for a brief question and answer session.


ES: Obviously manufacturers have been challenged by this problem for many years, but it seems that markets are saturating and maturing faster than ever. Can you sum up the challenges CPGs face and what they are looking for in a solutions or services provider?

TG: You’re right. For many CPG manufacturers, markets are maturing, and they really want to expand into emerging markets in other countries. For many global CPG firms, it can be difficult to effectively reach consumers—getting products on shelves. But there are other challenges too. CPGs need brand and market insights, and they need to communicate them to their distributors. They also need to accurately forecast and replenish stock. In developing markets there are wide, regional differences where one product may not sell as well as another. And retailers in these emerging markets can only stock products that are going to move quickly. As a result, retailers may only need a handful of each type of product a manufacturer offers.


That’s where the distributor comes in. The distributor needs to take these orders, aggregate them and translate them into information that the manufacturer can understand. That’s what these CPG manufacturers pay the distributors to do for them. What’s going on—from a technology perspective—is that many times the retailer has one set of codes, and the manufacturer has a completely different set of codes. Both the retailer and the manufacturers count on the distributors to translate the orders for them. So there’s mapping, there’s conversions and then there’s this whole process of preparing this information for electronic transmission. That’s called EDI or Electronic Data Interchange.


distributor management framework.jpg


ES: So analyzing the data seems to be really important.

TG: Remember that manufacturers and retailers may be dealing with multiple distributors. So the manufacturers need an organized way to manage these multiple distributors within a given market. These distributors are also frequently networked. Forward-looking manufacturers recognize the need for consolidating networks. They also need to seamlessly integrate business applications and smooth out transaction fulfillment.


Before they even get that far, the distributors have to be “on the same page” so to speak. So the framework needs to account for data consolidation. There needs to be an integrated data warehouse where all this information can accumulate before it’s analyzed. From there it’s a matter of looking at what products are moving faster in which regions and making sure retailers spot trends.


All of that analysis then translates into how much product needs to be produced, and how much needs to be shipped into each region. And other types of market insights—for example, customer preference for a particular type of electronic device or flavor of cookie—can be sent all the way through the distributor network. That way distributors may know that a manufacturer has inventory to support a particular trend or preference. Using the framework as a guide, all that information gets pushed back into the distributor world, so they can break down that information to get the products their markets require. 


ES: How does HP figure into this solution?

TG: It’s important to remember that CPG growth in developed markets is actually pretty stagnant. So manufacturers are looking to other areas to expand their brands. Now, the way that they are doing this is most likely a market at a time. They are building these relationships in one-off, individualized systems. One method of distribution may work for Latin America, but not at all for China. So the thought behind this is to develop a standard framework that can be leveraged across various markets and scaled for manufacturers of various sizes.


HP plays across all areas of this framework. For example, in the EDI phase, HP maintains the communications frameworks between distributors and manufacturers. In some cases we participate only in the transfer of the data, rather than the translation. The greatest benefit to using the framework is driving efficiency in the supply chain. And the forecasting ability is a critical part of that. We have specific products, such as HP Autonomy and Vertica, that help aggregate and analyze this data. But even more important to remember is that HP is a successful retailer, manufacturer and distributor.


In fact, in some of these areas we are market leaders in our given field. And we bring that experience to bear is creating solutions for all the players in Consumer and Retail Industries.     


To understand even about Distributor Management Frameworks, download the Viewpoint paper.


Tony_Galli_badge_176x304_tcm245_1512432_tcm245_1422290_32_tcm245-1512432.jpgAbout Tony Galli

As a client principal in HP’s Industry Consulting Services organization, Tony brings more than 25 years of experience, concentrated in the consumer packaged goods industry. Specifically, this includes strategic planning, software selection, change management, and organization design and training. As a result, he has been able to help clients navigate the transition of technology, culture, and organizational restructuring. Read more about Tony.

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