The following is the speech delivered by Xu Zhen, founder of Qingdao Lianshang Logistics, at the 5th FMCG + Internet Conference hosted by New Distribution, organized and published for readers. Today's sharing topics mainly consist of three parts: First, my journey in unified warehousing and distribution; second, how to achieve profitability in unified warehousing and distribution; third, how to set charging standards. From my graduation in 2006 to 2010, I worked as an operations manager at the logistics center under a local commercial group in Qingdao. From 2010 to 2014, I was responsible for leading the construction of a standardized logistics park, including team building and planning design. In March 2014, I founded Qingdao Lianshang Logistics. The first warehouse was 600 square meters, and we began recruiting distributors to move in. The second warehouse was 2,500 square meters, but it was still a flat warehouse; it took us about a year to fill it. From the second warehouse onward, we started to become profitable. The third warehouse was 8,500 square meters. At that time, we were ambitious. Although the warehouse conditions were relatively better than before, and attracting tenants was not difficult, management became a challenge. The current warehouse is a standard warehouse with high-rack shelving, forklifts, and conveyor belts, relatively standardized, and it is currently full. Now, let me focus on how to achieve profitability in unified warehousing and distribution. Distributors engaged in unified warehousing and distribution typically go through two phases: first, an excitement phase, where they have rosy expectations, and then they quickly enter a confusion phase, where they wonder how to set charging standards and how to make a profit. These are common issues in unified warehousing and distribution. What is the original intention of many distributors in doing unified warehousing and distribution? Five or six distributor friends get together, calculate their respective sales volumes and warehouse areas, say 100 million yuan, and think they have a baseline traffic. Initially, they believe 1+1>2, and the extra part is profit. But after actually doing it, they find that 1+1<2, and they don't make money. Why? I think **the main reason lies in the inconsistency of cognition between the two parties. The core point for distributors is to save money, while the core for the unified warehousing and distribution side is to improve service and create brand value.** In many distributors' warehouses, the aisles are so narrow that people can only squeeze through sideways. Profits are largely squeezed out of warehousing and distribution. So simple integration, with the illusion of 1+1>2, is logically flawed. In addition, in terms of charging standards, although distributors have tried to break down warehousing fees, delivery fees, and points on sales, they have never formed a standardized charging system. At the same time, in doing unified warehousing and distribution, they have not conducted cost analysis, resulting in poor operational control. To manage goods well, deliver goods well, and provide efficient and accurate service, in fact, there is a cost behind this. Combining the above, the final result is: no profit.

How exactly to make a profit? First, do a good job in financial budget control. Customer profit and loss analysis + cost budget + financial control This is our financial control budget model. It mainly has three columns: cost, prepaid income, and profit/loss. In the vertical columns, we list each specific customer. In the cost column, there is also a sub-column "amortization." What does that mean? Suppose we have a 5,000 square meter warehouse, but in the unified warehousing process, only 4,000 square meters are used, leaving 1,000 square meters vacant. The vacant area is called amortization. Prepaid income is the actual income based on the customer's contract terms. Profit/loss: we calculate the profit or loss for each customer. In the horizontal columns, rent, delivery fees, and labor costs account for at least 85% of the total cost of unified warehousing and distribution. Other parts, such as daily expenses and fixed asset depreciation, account for a relatively small proportion. The second is detailed items, breaking down costs to the smallest detail, such as printing paper. Regarding the allocation of printing paper: if we buy a box of paper today but haven't used it yet, how do we allocate it? We allocate the cost in advance based on the proportion of printed documents used by each customer. Even if it hasn't been used yet, we have already made a financial budget. Even tape is allocated to customers who have split-case distribution. What is this table for? 1. To analyze customer profitability. For example, compare historical data of 10 customers to analyze their profit and loss. 2. To make cost budgets. For example, when recruiting customers, analyze their current operations, calculate various costs, and compare them with our own operating costs. Although the customer may not have entered yet, and the data may not be accurate, we use a relatively precise algorithm to estimate whether providing services to this customer can make money. Ultimately, this achieves the goal of financial control. Second, reduce strategic losses; do not over-invest strategically. In the early stages of unified warehousing and distribution, do not be overly enthusiastic and lease oversized warehouses. Unless you are very confident in attracting tenants and have a plan for how many you can recruit and when, do not be aggressive. Start small and then expand. Do not let the vacancy rate be too high; make long-term plans. Previously, we had an 8,500 square meter warehouse with a very high vacancy rate, and we suffered significant losses. Third, implement lean management. Distributors' warehousing and distribution costs are very low, with almost no management. The boss does daily management, and one person below does the work. But we have a management team. In terms of management, I suggest implementing lean management and flat management, not pyramid-style management. Achieve "integration of people and orders": bind customers and warehouse keepers, directly linking employees' responsibilities, benefits, service, and customers. Determine suitable operational strategies, continuously refine every link and detail, and reduce operational internal friction. For example, in picking, should we use "seeding" or "picking fruit"? Is replenishment normal or manual intervention? These strategies need to be formulated based on your own conditions. Fourth, position as urban distribution, not supermarket distribution. Do not limit your thinking to supermarket distribution. Our products include warehouse leasing, distribution, and also managed services, and even financial services. Wherever we can make money, we do it. Fifth, select high-quality customers and promptly eliminate poor-quality customers. During operations, you may encounter poor-quality customers, and we should eliminate them promptly. Of course, we also face difficult choices, such as a distributor with a volume of 100 million yuan that doesn't make money but provides baseline traffic. At this point, we are torn: do we want traffic or profit? This choice depends on the stage and requires balance. How to set charging standards? Currently, there are roughly five models for unified warehousing and distribution. First, the traditional method is points and piece counts. There are pitfalls in calculating points and piece counts. For example, a distributor does 100 million yuan in sales, which seems large. But in the distribution of this 100 million, 20 million goes directly from the manufacturer to the supermarket logistics center, which has nothing to do with us; 20 million is absorbed by secondary wholesalers, also unrelated to us; and another 10 million goes to e-commerce platforms. Although it seems like a large customer with 100 million in volume, it has no bearing on our revenue. This must be clearly recognized. Another example: distributors calculate their warehousing and distribution cost points, but often they do not disclose some allocated costs, including management costs and hidden costs like unloading, which are not included. But for us, we need to make investments. In the 345 model, you may notice there is a minimum fee. This is because when we communicate with distributors, due to information asymmetry and lack of transparency, unforeseen costs may arise later. Especially when delivery costs are relatively high, I suggest having a minimum fee, such as 10,000 yuan per month. How to set it? First, accurately and comprehensively understand the customer's current operating conditions. Why is unified warehousing and distribution not profitable? Because each distributor is different, with different product categories. For example, the delivery cost for mineral water is about 0.7 yuan per piece, but for other products like Lay's potato chips, which have more split-case handling, the cost is about 1.5-2 yuan. The difference is significant. This brings certain difficulties to unified warehousing and distribution. So you need to fully understand delivery volume, terminal network distribution, split-case rate, self-pickup volume, etc. Second, when delivery costs are relatively high, it is recommended to adopt a minimum fee item; third, based on the comparison between the customer's existing operating costs and your actual operating costs, set an appropriate charging standard. Four principles to master when setting charging standards:

  1. Attracting customers with low prices is a dead end; service and empowerment are the core competitiveness. When doing unified warehousing and distribution, do not emphasize how much money you can save. Do not use price to attract customers.
  2. The best is to be suitable for financial budget control; do not be rigid about the charging form. Many people focus on charging standards, but before focusing on charging standards, you must first do financial budget control. This is the key, not your charging standard. Even if you use a points system, for example, some customers charge 8 points, as long as it makes money, it's fine. Do not be rigid about the form. The key is to analyze whether you are making money through financial budget control.
  3. It should not be too rough nor too rigid.
  4. Treat charging standards with a developmental perspective, and have constraints in the contract. Many distributors do Lay's potato chips today, then switch to C'estbon water tomorrow. So do not be overly fixated on the current charging standard; look at it with a developmental perspective. Of course, in the later stage, you should have foresight and include constraints in the contract. Note: Click Read the original text to get the "2018-2019 FMCG B2B Industry Trend Report" -END-