The 6th China FMCG Channel Innovation Conference, hosted by New Distribution, a professional FMCG new media platform, was held grandly from April 1 to 3 at the Howard Johnson Agile Plaza Chengdu. This grand event attracted 3,000 industry professionals including distributors, community e-commerce platforms, brand owners, and internet companies from all over the country, with a full house and an unprecedented scale. On April 1, at the main forum of the conference, Shi Kunliang, Industry Director of Annto Smart Link, delivered a keynote speech, sharing the transformation and upgrading strategies of logistics supply chains under omni-channel branding. Annto Smart Link is currently one of the enterprises with the deepest research in the field of "One Inventory". Shi Kunliang, Industry Director of Annto Smart Link, focuses on multiple logistics fields such as One Inventory, warehouse network collaborative planning, and supply chain channel transformation. Currently, Annto serves well-known clients such as Liby, P&G, Blue Moon, Feihe, Nestlé, and Orion, with rich frontline practical experience and unique insights into the market. New Distribution has carefully organized and excerpted the essence of Shi Kunliang's speech at the conference, and now publishes it for the benefit of New Distribution readers. Due to the impact of the macro environment in 2020, businesses in various consumer goods categories have faced enormous challenges. Whether brand owners, distributors, or logistics providers serving both parties, they are all very anxious. This anxiety mainly includes four aspects: First, how to find more business opportunities and increase business growth? Second, how to deal with fragmented and powdered orders and ensure timely delivery? Third, how to face the pressure of high inventory in the distribution channel? Fourth, how to improve the terminal delivery experience? Fundamentally, this anxiety stems from the increasingly obvious pain points in the channel logistics of the traditional consumer goods industry, with intensified risk of losses: consumer demand is difficult to predict accurately, production and sales planning are disconnected, product channels cannot be opened up, and high inventory with slow turnover... But we can also see that some good solutions have emerged in the industry, and we take this opportunity to interact and discuss. -01-

Omni-channel: An Imperative

First, most domestic industries have shifted from competing in incremental markets to competing in existing markets. In the existing market, the final competition is more about management innovation, transformative innovation, and efficiency. Thus, our goals are mainly two: One: To find new increments in the existing market. Two: How to improve the efficiency of operation and management. In this process, we see three types of enterprises: The first type: emerging innovative consumer brands. Yesterday, I talked with a friend from a daily chemical brand whose average annual online order amount has exceeded 120 million yuan since 2015. Due to online support, more and more brands are rising rapidly, but after rapid growth to a certain scale, they will gradually lay out offline channels. The second type: head brands actively transforming their channels. They are basically shifting from the original large agency system to direct distribution and terminal control to achieve deeper market penetration. In the future, excellent FMCG brands must have retail genes. The third type: head brands quickly embracing the internet economy. Because offline channels are basically in a state of stagnation, the main growth channels may come from online. As post-90s and younger consumers have become the main force, the internet is a more important consumption channel for them. Why have more and more brands been making omni-channel layouts in the past few years? Especially head brands, which have elevated this to the height of the overall corporate development strategy. In fact, whether online or offline, the ultimate goal is to achieve a more efficient connection from production to terminal consumption. To achieve this, the integration of BC channels is imperative. Only with the capability of integrated 2B and 2C services can there be more growth and market prospects. Current business competition is about integrating all resources that can be integrated to reach consumers and build core competitiveness. Originally, online and offline had completely different organizational structures, process systems, ERP systems, and even entire supply chain systems. But now, in truly fast-growing head enterprises, these are all converging. Given this, to solve the various anxieties in the current market, whether for emerging brands or head brands, omni-channel layout and upgrading the entire supply chain system are almost the only way. Since it must be done, why not do it early?

-02-

Retail Only Divides by Efficiency: Are There Solutions to Offline Channel Pain Points?

As mentioned, many brands' rapid growth has occurred in new channels or online, ultimately because these channels are more efficient. Dividing retail into new and old is meaningless; efficiency is the essence. Traditional offline channels have many pain points that need adjustment and improvement. In the past, the multi-level distribution of traditional offline channels led to very high capital occupation. Due to brand owners' policies of payment and inventory pressure, many profits were paid to banks. A product goes through 6-10 transfers from production to the consumer's hands. In fact, only the last segment that delivers to the consumer is truly valuable and meaningful; the preceding parts are ineffective transaction costs that need optimization and improvement. Problems such as high distributor inventory, manufacturer-distributor games, and being too far from consumers have always existed. Moreover, under traditional channels, enterprises produce for inventory, but what is truly needed is to connect to real consumer orders and then coordinate backend production and sales driving. Will traditional channels and distributors be replaced? The answer is no. If distributors had no value, they would have been replaced during the B2B boom, and B2B platforms would have developed rapidly or become industry unicorns. But it seems that hasn't happened. China is too large, with huge differences in local customs and practices. The localized resource capabilities of distributors are indispensable, but the inefficient traditional channels still need some functional transformation. In the past, the distribution system was a profit interception platform, a manufacturer-distributor game platform, a capital platform, and a logistics platform, while also serving terminals. In the future, distributors only need to do one thing: transform into operators, collaborate with manufacturers to improve terminal shipment efficiency, and receive service fees instead of layers of profit exploitation and cost waste. It should be noted that any waste of capital and resources in any link is the culprit affecting the efficiency of the entire business process. The goals of manufacturers and distributors are the same: to speed up the flow, grow the business, and increase efficiency. Let the logistics function be centrally managed by the brand owner. Order flow, cash flow, and information flow can all circulate in the original way, but the entire goods in the logistics supply chain must be managed as "One Inventory" to achieve centralized goods and flattening of the entire chain.

-03-

The Development of One Inventory

Why do we need One Inventory? Let's see what impact One Inventory can bring. One Inventory first appeared in the industry in 2015, when some enterprises began to promote it. Annto Smart Link was among the first. The promotion of One Inventory can be divided into three stages: Stage 1: Physical One Inventory. This stage mainly solves the problem of inventory transparency through informatization. It physically integrates the brand owner's inventory with the inventory of city distributors (which may be 10 or 20). In this way, the ineffective transfer and handling of logistics from the brand owner to the distributor's warehouse is eliminated, achieving standardized warehousing and standardized distribution, improving terminal experience and efficiency. Stage 2: Inventory One Inventory. The brand owner's inventory and the inventory of distributors at all levels are connected, truly achieving lower safety stock levels to meet market supply. Stage 3: BC One Inventory. At this stage, the problem of product differentiation between online and offline is basically solved. The same product is sold through the same channel, and at the logistics level, BC orders are operated in the same warehouse. For terminal physical distribution, large items have already achieved BC order integration. Offline C-end orders and offline small store orders are also delivered together on the same vehicle. In fact, One Inventory is about connecting the production end and the distribution end, managing the inventory of e-commerce, direct sales, KA, circulation, new retail, and special channels in one system, integrating online and offline channel inventory into one inventory, solving the problems of multi-level distribution and inventory waste in the traditional supply chain, and promoting full sharing and rapid turnover of inventory. In this way, the entire supply chain eliminates a lot of ineffective work and resource waste, and efficiency is greatly improved. This enables the integration of BC channels in omni-channel to form stronger competitiveness when new channels continue to rise. To understand the true value of One Inventory, just look at the changes after Annto Smart Link completed the One Inventory transformation for Midea. Through the One Inventory transformation, Annto Smart Link shortened the order delivery cycle from 45 days to 20 days, greatly reducing the capital occupation of distributors. The turnover days of finished goods inventory were reduced from 51 days to 35 days. Midea's national warehouses were reduced from 2,244 to 138, a decrease of 95%. Through the underlying capabilities of the entire value chain established by "One Inventory", within Midea, Annto Smart Link successfully transformed logistics from a cost center to a value center. These data, when applied to the FMCG field, may have even greater potential, showing the significant impact One Inventory can have on the FMCG industry.

-04-

How to Implement One Inventory

How exactly is One Inventory implemented? Annto Smart Link already has a proven complete solution. First, this must be a top leader's project. It must be promoted by the enterprise's boss, president, or marketing president, with logistics supply chain cooperation, because it involves changes in many marketing models and process marketing methods. Second, the internal marketing processes must be completely reengineered. After restoring the terminal chain data from the production base to the C-end consumer, through analysis and modeling, the warehouse logic is clarified and then implemented. Of course, the warehouse logic is determined based on the product characteristics and order density of the enterprise. Third, after setting up warehouses, it is still necessary to find some suppliers with national networks to promote pilot projects. Shi Kunliang also frankly stated that in the current industry, when doing One Inventory brand solution exchanges and consultations, Annto Smart Link often encounters JD.com and SF Express. At present, it is still the mainstream for distributors to independently operate warehousing, logistics, and sales. 90% of distributors still self-operate, because in the past there was no service provider with nationwide standard urban distribution infrastructure that could meet their needs. Today, Annto Smart Link's advantage lies in its years of continuous layout. It has 136 fully self-operated network nodes nationwide, as well as more than 3,000 after-sales delivery and installation outlets. With the logistics infrastructure capable of completing the last mile, it can meet the deep distribution needs of brand owners and distributors on the logistics end. At the same time, Annto Smart Link also has the most abundant and proven methodology and experience in One Inventory transformation as one of the earliest enterprises to carry out such transformation, enabling it to provide brand owners with more upgrades in various aspects. Annto Smart Link has already conducted in-depth research and accumulated rich practical experience in the 2B logistics field, and later extended to 2C order service capabilities, which have expanded rapidly. Currently, its 136 warehouses handle an average daily large-item order volume of over 30,000 orders, and small-item order volume exceeds 350,000 orders. In general, all transformation and innovation must ultimately be validated by performance growth and profit. At present, Annto Smart Link has cooperated with many brands such as beer, snack food, beverages, and beauty brands on One Inventory business. Today, if an enterprise cannot continuously optimize its supply chain in omni-channel and form its own core competitiveness at the channel level, it will not be able to cope with the rapidly changing channel landscape. Once the tip is adopted, a reward of 400-2000 yuan will be paid.