Click 'Read Original' for details Simply put, controlling inventory means increasing channel profits without reducing sales volume. Stable channel profits are the prerequisite for other marketing activities. Most companies are likely setting their 2017 goals and plans. I've thought about this for a while, and my conclusion is: The top priority for sales work in 2017 is controlling inventory. Why not sales volume, profit, product upgrades, or big single products? Why make "controlling inventory" the top priority? Sales, profit, and upgrades are also important and are goals. However, because from 2014 to 2016, marketing activities planted a "time bomb" in the channel. In 2016, distributors faced a situation where many companies, especially major brands, risked overall collapse. All company efforts depend on distributor cooperation. "Controlling inventory" is just the fuse to defuse the "time bomb." Controlling inventory is not a goal for 2017 management, but it is an important method. Perhaps it's only a temporary task for 2017. Although not all companies treat it as the top priority, this work has universal significance. Why Control Inventory? Distributor collapse can be financial, with broken capital chains, but more often it's a loss of confidence. If distributors don't profit for two consecutive years, their confidence collapses. Where did distributor profits go? Did sales drop too much? Actually, sales declines are not large; some industries only show signs of decline. What really affects distributor profits is overstocking. Overstocking squeezes out distributor profits, and only controlling inventory can solve this. In the past, sales growth led to profit growth. Overstocking is different: even if sales grow, profits decline. In years of sales growth, overstocked goods were absorbed by terminals and bought by consumers. When sales stop growing, overstocking not only fails to be absorbed but also loses gross margin. Because of overstocking, distributors who can't absorb locally start cross-region selling. Some distributors with distribution advantages (like those in central cities) find it especially easy, particularly when "provincial agents" are making a comeback and when B2B e-commerce is seeking supply everywhere. Cross-region selling not only affects the distributor's own profits but also, through low prices, affects neighboring distributors' profits and makes terminals lose trust in distributors. Because of overstocking, distributors have to increase promotions. But even increased promotions are futile, as terminals can't absorb more; these are not growth years, and overstocking can't force sales. Because of overstocking, distributors must recall near-expiry products monthly, especially short-shelf-life items, and handling these loses profit. If overstocking once brought growth, now it does more harm than good. Because of overstocking, manufacturer-distributor and distributor-terminal relationships are distorted. Only controlling inventory can solve the current problems. Some might say that even if the core issue is distributor profits, manufacturers could just give distributors bigger profit margins instead of controlling inventory. I think increasing manufacturer investment won't solve this now. As long as overstocking continues, the investment will be used to absorb overstock. Only controlling inventory can solve distributor profit issues structurally. Why Is It the Top Priority? Controlling inventory is not a 2017 goal but must be a primary method or means. Whether it's increasing sales, upgrading products, or shifting structure, distributor cooperation is essential. If distributors collapse, the sales force system will soon follow. To get distributor cooperation, distributors must be kept in a normal operating state. In recent years, because distributor profits have been too low for too long, their emotions are at a tipping point. A small incident could trigger a huge backlash, something never seen before. Controlling inventory is an effective way to regulate distributor profits without affecting major company policies (no extra costs) and without causing huge sales fluctuations (short-term monthly fluctuations may occur). So, controlling inventory may not be the main goal for 2017, but it is the top priority. Once this task is done, it may be forgotten. I emphasize that controlling inventory is not the most important marketing work, but it is the top priority for sales work. There's a difference, and I stress this to avoid misunderstanding. How to Control Inventory? Some might say: If you don't overstock, competitors will! Whoever doesn't overstock loses. This logic has been popular. Currently, manufacturers with normal market conditions are precisely those that control inventory. Controlling inventory is definitely not about shipping less or not shipping; it's about "digesting first, then shipping," like "Yu the Great taming the floods," not blocking but channeling. This is an old trick, but it tests a manufacturer's management ability, especially process management. If manufacturers go deep into terminals, they'll find that the relationship between distributors and terminals has deteriorated compared to five years ago. Focusing on overstocking naturally affects terminal channeling. So in 2016, I wrote an article saying marketing has regressed, and many disagreed. Of course, some well-performing companies are exceptions; I'm talking about the overall situation. Remember, overstocking only works with big accounts; small accounts can't be forced. So when I say distributor-terminal relationships have regressed, it's precisely because they only focus on a few key big accounts and neglect the majority of small accounts. In this period of stagnant growth, both big and small accounts are crucial. Some might say big brands also have products in small terminals. I suggest executives ask small accounts: Where did your goods come from? In 2016, I said there was a "resurgence of second-tier wholesalers," and I had evidence, not just talk. In plain terms, if overstocking is pushing down level by level, then controlling inventory is "doing sales in reverse." There are still good companies that insist on doing the market this way. Some might say salespeople are too busy to do terminal channeling work. I can tell you, salespeople are busy mainly with "after-sales" work from overstocking. Once you control inventory, that "after-sales" work disappears, and they have time for terminal channeling. So, controlling inventory is not just about shipping less; it's an optimization of the entire sales work, a "process reengineering" of sales work, and controlling inventory is just a key part of that reengineering. Will Sales Collapse with Inventory Control? Overstocking might cause distributors to collapse; will controlling inventory cause sales to collapse? That's what many companies worry about. Controlling inventory not only won't hurt sales but may even boost them. Of course, in the first month, sales might be affected. A friend gave an example of a company that controlled inventory. As soon as they did, distributor gross margins rose immediately, and their desire to stock up increased. At the end of 2016, I saw and heard of examples of companies controlling inventory. They were all good companies, ones distributors eagerly wanted to represent. As long as controlling inventory solves distributor profit issues, distributors will definitely focus on your products. After all, there aren't many products that bring profits to distributors now. If distributors focus on your products, will sales still be a problem? Using overstocking to force sales is now just a wishful thinking of salespeople. Using inventory control to solve profit issues and using profit to motivate distributors is the right solution. Summary: Because distributor profits have been too low for a long time, distributors are at an emotional tipping point. Controlling inventory is an effective means to increase distributor profits without affecting company expenses or long-term sales. Without solving distributor profit issues, normal marketing work like product upgrades, marketing transformation, and sales growth can hardly proceed. Controlling inventory is not about not shipping; it's about "process reengineering" of sales work. Through process reengineering, we eventually move toward normal shipping. -END-