Click to read the original text for details. Recently, while chatting with a few close friends about industry trends and developments, I heard one friend mention a distributor who had a relatively large business but could no longer sustain it. Why? The speaker didn't mean to catch my attention, but I decided to call this distributor friend for details. He was hesitant and didn't reveal the real reason, asking me to visit his company for a chat. Honestly, both emotionally and logically, I needed to visit. Upon meeting, the distributor friend told me that in previous years, sales were good, performance grew rapidly, and profits were substantial. But in the past two years, the market has been sluggish, the overall environment is poor, and competition is fierce, reaching a point where he can no longer operate. So he decided to stop being a loss-making brand porter. I asked three questions:

  1. Why can other distributors continue to operate in such an environment?
  2. Why can some new entrants to the industry also operate?
  3. Have you checked where the problem lies in your own operations? These questions were a wake-up call. The distributor friend took me to see his market, his warehouse, and the product displays in the supermarkets he supplies. He also arranged a discussion with his sales promoters and salespeople. Finally, we found the answer: his market development capability was still strong, and his staff were capable, but the problem was in management. It was precisely "success in marketing, failure in management!" This is also a bottleneck many distributors encounter. What exactly are the management problems? Too Many Brands People have a bad habit of wanting more, thinking that more brands can better capture the market and bring more profits. But they don't realize that a knife cannot be sharp on both sides, and a person cannot excel in everything. The same applies to the market; chaos brings more trouble. First, having many brands requires good management, from purchasing management to warehouse management, ledger management, business management, sales management, and logistics management. If these management aspects lag or are poorly executed, they often backfire, not only making sales efforts futile but also causing waste, such as inventory pile-up, waste of market resources, waste of capital, waste of logistics and distribution, and waste of human resources. Second, if you don't plan well with many brands, you easily lose focus, lack a flagship product, and end up as a general store selling everything but selling nothing well. This leads manufacturers to overlook you, and you become a second-tier distributor. You won't get quality resources from manufacturers, and even basic support is hard to guarantee. Without strong manufacturer support, you'll only be working hard for nothing, making wedding dresses for others. Moreover, having too many brands affects your own image. If you have ten brands and none of them succeed, others will think you can't build brands. Excellent manufacturers will no longer approach you, and your image in the region will only be as a supporting role. I have conducted brand diagnostics and sorting for more than ten distributors and found that they lack the courage and methods to categorize and discard brands: First, they are reluctant to abandon brands that have no retention value, those that are "a pity to discard but tasteless to keep." Second, they don't introduce competitive brands, lack research on brand selection, and don't know which brands have potential value. Third, they lack market strategy planning for quality brands, leaving the market at the mercy of manufacturers without their own regional market layout and implementation plans. Here, I have three major suggestions for distributors:
  1. Use quantitative indicators to immediately categorize and clean up brands.
  2. Create market strategy plans and execution plans for retained brands.
  3. Introduce brands with market potential and profitability. Lack of Competitive Brands Having too many brands can lead to neglect of details and management chaos, but lacking competitive brands is another issue, though the two are causally related. We often see that distributors with poor management often have the same problem: they lack excellent brands, and because they don't have excellent brand manufacturers to guide them, their management can't improve. Conversely, distributors with good management easily accept excellent brands, and excellent brand manufacturers will impose requirements and guidance on their management. This is probably the principle of "birds of a feather flock together." The result is that management and excellent brands complement each other. My suggestion is that distributors must have at least one excellent brand; otherwise, it's hard to establish a foothold in the regional market, let alone achieve success. If you don't have an excellent brand yet, plan to introduce one. If you have competitive brands, make regional market strategies and implement them. Excellent brands require your management to keep up because large enterprises force you to improve management. If you don't have a top-tier brand, I think you should make your existing second-tier brands look like first-tier brands, making your market share or displays in stores impressive. I have always held this view: a manufacturer's salesperson who hasn't done well in a regional market is not an excellent salesperson; a distributor's salesperson who hasn't done well in a dozen stores is not a good salesperson; similarly, a distributor who hasn't done well with a brand is not an excellent distributor. Manufacturers can evaluate distributors and salespeople accordingly. Lack of Reasonable Inventory Arrangement In management consulting, we often find that distributors and manufacturers share a common problem: there is no true safety stock or reasonable inventory in warehouse management. First, they lack awareness of safety stock and reasonable inventory; second, they lack methods for safety stock and reasonable inventory, leading to significant waste. I once helped a distributor clean up 31 million yuan of unnecessary inventory and eliminate 8 out of 11 brands that had no retention value. The waste of capital and other resources was considerable. So, what waste does unreasonable inventory cause?
  1. Unnecessary waste from handling, stacking, placement, protection, and searching.
  2. Difficulty in implementing first-in, first-out (FIFO). If inventory increases, to use older stock first, extra handling is needed. To save effort, new stock might be piled near the door, and using new stock first can lead to quality and shelf-life issues for older stock.
  3. Loss of interest on inventory and increased storage management costs.
  4. Decrease in product value, becoming dead stock.
  5. Waste due to expiration dates, poor storage, and other inventory damage.
  6. Occupying warehouse space, leading to unnecessary investment in additional space and warehouses.
  7. Intangible losses from inventory, especially hiding problems and eroding profit margins.
  8. In summary, unreasonable inventory planning leading to excessive inventory causes unnecessary waste. Why do we need inventory at all? We observe that the biggest reason is "fear of problems." For example, if a supermarket promotion next week only needs 100 items, we often purchase 120 to "avoid problems." Thus, to prevent issues from escalating, inventory becomes necessary, and many problems are hidden. So, how to reduce inventory costs? The usual approach is to accelerate and increase inventory turnover.
  1. Set a reasonable inventory ceiling based on usage; stop purchasing when the maximum is reached.
  2. Rectify inventory by clearing out long-term, moldy, unusable, and other dead stock.
  3. Optimize storage methods by choosing different stacking methods based on brand, category, and product characteristics to maximize warehouse usage. For example, toilet paper rolls are typically stacked 10 layers high; more would crush them.
  4. Adhere to FIFO to reduce inventory losses due to price changes.
  5. Optimize human resources by reasonably setting warehouse staff numbers to reduce labor costs.
  6. Set warehouse location and size reasonably based on sales characteristics to reduce transportation costs.
  7. Learn from factory inventory methods, such as "22 inventory defenses" and modern inventory logistics. Loose Business Tracking Loose business tracking is almost a common ailment and problem for all distributors. I believe that for distributors to transition from extensive to refined management, they must establish four pillars: first, "process orientation," second, "standardization," third, "data orientation," and fourth, "informatization." First, all work should follow processes, conducted horizontally. So, sort out each link according to the process and then control the nodes. This is the key to distributor business management. Second, we know that without standards, execution is impossible, or we don't know how to execute. The biggest difference between excellent and ordinary companies is that excellent companies have execution standards. Because they execute according to standards, they can achieve "ordinary people doing extraordinary things." Ordinary companies, on the other hand, always rely on "heroes" to execute creatively, following the "hero's" standards. Therefore, once the "hero" leaves, the company fails. Third, with standards but no data, it's as if there are no results. All company results are measured by data; data is the criterion for all standards. Emphasizing data management is the future direction of management. Finally, in the information age, you must boldly use information tools to work for you. With high labor costs and highly developed information tools, if you haven't fully utilized information tools, you are a backward distributor who can't keep up with the times and lacks competitiveness. For business tracking, I believe you must do eight tasks: plan formulation, standard setting, market visits, log creation, information feedback, basic information maintenance, tracking management, and auditing. At the same time, establish a mechanism with clear division of labor, clear responsibilities, smooth operation, and closed-loop connections to ensure the smooth operation of the control system. In fact, the management problems of distributors are not limited to these; there are many more, but these are more common. Of course, having problems is not the issue; the key is whether we are willing to improve, how to improve, where to start, who to assign, and what methods or tools to use. Therefore, under the new normal, distributors must keep up with the situation, think more about management, and work harder on it. They must not stumble on management to operate smoothly; otherwise, they will experience "winning in marketing, losing in management." Nowadays, many distributors have more business, larger companies, and more staff, but management remains the same as before, leading to the consequences seen in the aforementioned distributor. As Kazuo Inamori said, "Small and medium enterprises are like pustules; when they grow, they burst." The logic is simple: in the past, we used motorcycles to carry goods; now we use cars. Can you drive a car the same way you ride a motorcycle? In the past, you used your hand to engage the clutch; now you use your foot. In the past, you used your hand to accelerate; now you use your foot. It's completely different. Marketing has advanced, but management lags behind. If you don't regress, it's just luck. So, distributors must learn to manage both operations and management with both hands, and both must be strong!