Have you ever toured a CPG dealership? I remember visiting a large distributor of a famous national snacks brand. Being a snacking enthusiast, it felt like being a child in a confectionery store!
This visit was among my prior experiences grasping how crucial a dealership partner is to a brand. Super stockists, distributors, and sub-stockists contribute to the essential supply chain, facilitating the flow of thousands of CPG products to millions of Kirana stores nationwide.
Several dealers utilize financial accounting software to make sense of their purchasing patterns. In contrast, smaller ones rely on their ‘bahi-khaata’ to track the amount of their capital in their inventory.
Whatever gets sold and whatever remains unsold is returned to the company. If distributors’ investments are tied up in claims or slow-moving inventory, they cannot aspire to enhance their profitability or streamline their processes. Hence, they remain stagnant, unable to discover an improved method of operation.
Brands also grapple with inventory management issues. Once their products reach the distributors or super stockists, visibility on product movement stops abruptly. As a result, a company’s inventory management—which should ideally be methodical—relies partially on the historical purchasing patterns of their distribution partners and partially on instinct.
A recent study revealed that the sector suffers from an issue of inventory accuracy.
The average CPG company accurately represents only 63% of its inventory in its books. That means for every ₹100 worth of product a company believes it has, it can only account for ₹63. The remaining ₹37 is lost somewhere within the system, whether on store shelves or in a warehouse.
The study also discovered that the average CPG company has 25 days of inventory, while the optimal level should be 19 days. Consequently, the CPG sector loses billions of dollars annually due to inefficiencies in its inventory management.
The importance of knowing which products are selling well in which stores cannot be overstated. Distributors collect and relay this information to brands for analysis. The data, however, may be outdated by the time it reaches them since it isn’t collected in real time.
As a result, brands may miss opportunities to increase sales. Sometimes, sales teams may lack visibility into slow-moving or out-of-stock products, leading to lost sales. To tackle these challenges, brands must collaborate closely with their distributors and implement systems providing real-time visibility into inventory levels and sales data.
A comprehensive DMS can allow companies to adopt a ‘proactive’ approach to inventory management and forecast future demand.
The Distributor Management System is an impactful tool that assists CPG companies in overcoming numerous challenges in the modern retail landscape. An intelligent and user-friendly DMS system can provide brands and distributors unparalleled visibility into crucial data such as sales trends, inventory levels, and consumer demand. By facilitating brands to access such detailed information, a DMS can help them make better informed, data-driven decisions to boost their bottom line and better serve their customers.
A DMS provides real-time sales data to the brand. That significantly simplifies businesses’ ability to comprehend how changing market conditions affect their products, empowering them to make necessary adjustments promptly and efficiently.
For instance, one of our clients noticed that the sales figures for a particular product line, their newly introduced bottled fruit juices, were declining, leading to high return rates for this product line. Yet, without a DMS, they would have persisted in believing that either the product was faulty or the distributor wasn’t forwarding it to the retailers efficiently.
However, the DMS revealed the reason behind the high returns was that the caps of the juice bottles were somewhat loose, causing the beverage to ferment and reducing its shelf life. Access to this crucial information in real-time allowed the company to recall the later batches, amend the seals, and reintroduce them into the market before expiration.
Apart from offering real-time, on-demand trends, the distributor management system also grants businesses valuable insights into inventory patterns across all outlets. Utilizing DMS dashboards to identify supply and demand patterns allows companies to optimize distribution channels, negotiate better prices with suppliers, and identify cost-saving opportunities.
A DMS also assists a distributor in managing his inventory better, as he is now aware of which products are nearing expiry, which ones are selling quicker, how to promote schemes better, etc. As a result, he can maximize his investment and enhance relationships with the brand.
At the distributor level, a DMS can help ensure that batches are rotated appropriately, and older products are sold first. That is critical as it helps avert wastage and guarantees that customers receive the most current products. In addition, it allows distributors to report any product issues before they expire.
Reconciliation of inventory is one of the most notable advantages of a DMS. This system helps reconcile inventory discrepancies across various locations or departments quickly and effortlessly at the end of each month. In addition, a change approval mechanism is included in the system that allows mid-level managers to approve changes before they go live. Lastly, DMS systems provide users with automated email notifications about relevant monthly changes.
Producing reports is one of the most valuable capabilities of the software. This system can generate reports on inventory levels, sales figures, and other information. This information can be exceptionally useful in planning future production levels and strategies. Additionally, the system can help monitor distributor performance. This data can pinpoint where distributors fall short of expectations and adjust accordingly.
Automation and data-informed decisions are the keys to success in the current marketplace. CPG companies that can employ these tools will be able to outpace the competition and continue to expand their businesses.
The DMS system offers the ability to do both. It empowers brands to make decisions based on data rather than speculation. Moreover, it automates numerous tasks needed to maintain inventory levels. For CPG companies, having a DMS is crucial to success. It provides the necessary tools to make knowledgeable decisions and manage inventory levels.
To experience the power of Basic360 DMS yourself, book a demo today!