Click to read the original text for details In today's FMCG industry, various new economic models are emerging. While distributors see opportunities, they face more brutal challenges. According to surveys, in 2019, FMCG distributors generally face five major cost pressures, mainly reflected in five aspects: labor costs, marketing expenses, capital management, damage handling, and logistics costs. Today, we will solve these five problems through in-depth analysis. -01- Personnel Costs Everything starts with people. Generally, the largest expense for distributors is personnel costs, so reducing personnel costs can effectively reduce our costs. However, with consumption upgrades and rising prices, personnel costs are also increasing. This is due to the overall environment, which we cannot change, so reducing personnel costs is not easy. If per capita costs cannot be reduced, the only way is to control expenses by reducing unnecessary personnel. The core of controlling personnel costs is to establish staffing standards. The basic configuration of distributor personnel is nothing more than logistics, finance, sales, promotion, logistics, etc. Below, we look at the standards for each position.
1. Logistics service personnel: mainly include the number of customers served, order quantity, job responsibilities, etc. 2. Financial personnel: sales order volume, number of customers for reconciliation, cashier, financial bookkeeping, tax reporting, etc. 3. Warehouse personnel: warehouse area, conditions, number of forklifts, shipment and arrival volume, etc. 4. Drivers: customer type, number of customers, transport distance, vehicle tonnage, and daily shipment volume, etc. 5. Promoters: mainly consider setting a break-even point. Depending on the industry, single-store output varies. Calculate and set the break-even point before hiring, so that expenses do not exceed the standard and the output ratio tends to be reasonable. Finally, salespeople are the core of distributor staffing, so they are discussed separately. During the development period of a distributor, especially when aiming to impact a larger scale, the sales team also needs to grow, which requires a scientific increase in staffing. Generally, salespeople have a low base salary plus commission structure. In second- and third-tier cities, the average base salary is around 2,000 yuan, and the rest is commission based on market performance. Therefore, even if new salespeople are added, it usually does not waste too much money. The cost standards for salespeople can be considered from the following points: 1. Number of outlets: for example, one salesperson for every 100-150 stores; 2. By area size: for example, one salesperson per district in the city, while also considering differences in store density between districts for adjustment; 3. By population: for example, one salesperson per 150,000 or 200,000 people; 4. By sales amount: can be evaluated by calculating gross profit. For example, monthly sales of 150,000 yuan with a gross profit margin of 10% gives a gross profit of 15,000 yuan. If the salesperson's cost for achieving this sales is 6,000 yuan, the profit after deducting this expense is 9,000 yuan. Therefore, it is reasonable to allocate one salesperson for 150,000 yuan in sales. -02- Marketing Expenses Marketing expenses are the core of a trading company. Generally, a company with sales reaching 200 million will have sales expenses exceeding 10 million. This is a huge number, so managing marketing expenses is also one of the core aspects of cost control. First, analyze what expenses exist. To avoid exceeding the budget, it is necessary to plan well and set a red line. For example, set target sales by product, then invest expenses according to the sales plan, and finally calculate the overall planned expenses. Of course, expenses can also be broken down by different dimensions: Time dimension: decompose the expense plan into each quarter, month, etc. Project dimension: can be subdivided into long-term display, long-term promotion, various activities, city rewards, customer rebates, etc., as shown below: It can also be further broken down to the expense items of each store, as shown below: Channel and department: can also be subdivided by channel and company department, and then further detailed to each channel and department's sub-categories. In general, in terms of marketing expenses, distributors should have target plans and decompose them to each department, product line, time period, and even individual, then set a red line and arrange dedicated personnel to control it. As for how to control specifically, my suggestion is to hold a monthly fee-to-sales ratio meeting. Through the meeting, we need to understand some specific data, such as salesperson salaries, interest from accounts receivable, and even miscellaneous fees. We need to understand all of these clearly. Finally, through the data, we can evaluate the expense-output ratio of each department, channel, and store, adjust the direction of expense investment according to the actual situation, and maximize the input-output ratio of expenses. The table can be used as a reference for distributors. -03- Capital Management The purpose of capital management is to accelerate capital turnover and improve capital utilization efficiency. It mainly includes four aspects: 1. Cash Management First, place orders scientifically under the premise of safe inventory. Second, set up and assign dedicated personnel for the verification and cancellation of manufacturer expenses, and promptly incorporate the expenses into the current payment. Third, manage the funds in the manufacturer's account. For example, if you pay 200,000 yuan, but the manufacturer ships 150,000 yuan worth of goods due to insufficient inventory, the remaining 50,000 yuan may be ignored or even forgotten. Finally, manage the daily cash surplus through financial management. Some large distributors have daily cash surpluses of hundreds of thousands of yuan. In fact, we can fully use this cash for financial management. Many banks have similar financial management projects. Invest cash at 4:00 PM every day, and it will be released naturally at 9:00 AM the next day. Without delaying ordering, the daily income is enough to pay the wages of one or two employees. 2. Make Good Use of Financial Leverage Financial leverage is simple. For example, a boss uses 6 million yuan in funds to do a 50 million yuan business, but in reality, 5 million yuan is sufficient. Reducing this 1 million yuan investment means reducing the annual bank interest and other expenses of 1 million yuan. Some people ask, what if there is a capital shortage during the peak season? It is also easy to solve. First, temporarily borrow for 1-2 months, which only incurs 1-2 months of interest. Second, hold ordering meetings in advance. For example, for the Mid-Autumn Festival in September, we hold the ordering meeting in August to recover funds in advance for peak season operations. 3. Shorten the Accounts Receivable Period Many major channels have accounts receivable issues. We must first establish an early warning mechanism and adhere to principles. On the one hand, when negotiating contracts, try to shorten the credit period, and distinguish between normal contracts and trade contracts. On the other hand, strictly control the landing loans of small stores and do not cultivate bad habits at the terminal. In addition, we should set up dedicated personnel to check accounts receivable, strictly monitor the aging of receivables, and report in a timely manner to ensure timely recovery of funds. 4. Reduce Bad Debt Rate Most distributors will face the problem of dead accounts and bad debts, even losing millions. Facing this problem, we should let salespeople always pay attention to the customer's operating conditions, such as whether the customer's company has major changes, whether payments are delayed, or whether reconciliation cannot be done, whether this customer treats other distributors the same way, and whether the cooperation method suddenly changes, etc. We need to prevent these in advance. -04- Damage Management Damage is a headache for every distributor. Once a distributor reaches a large scale, damage of hundreds of thousands is common, so refined management is needed to reduce this loss. I suggest that every distributor should assign someone to make a report to count inventory, including brand, product name, inventory quantity, batch number, expiration date, cost, processing deadline, and the resources needed to process these products, and track it continuously every week. Purchasing should also do the same, making detailed reports to track and plan inventory, sales, last month's sales, promotion periods, budgets, etc. In addition, it should be noted that goods that have already reached the terminal, even if they are near expiration or damaged, should be processed at the terminal as much as possible and not brought back. We should also introduce corresponding incentive policies to encourage promotional staff to handle goods at the terminal. For example, a company uses a points system for personnel management. During terminal promotion, if a bag of flour is broken, the terminal promoter sews it up with a needle and thread and sells it, and the company rewards them with points. At the same time, a strict return and return-goods mechanism should be introduced for goods sold to the terminal. Whoever returns the goods is responsible. Of course, you can also introduce relevant systems according to your own company's situation. -05- Lean Logistics The purpose of lean logistics is to maximize efficiency. We should maintain the lowest possible inventory while ensuring no stockouts. The key indicator here is inventory turnover rate. For distribution costs, we need to consider whether the configuration of self-owned vehicles and forklifts is reasonable, consider the off-season, consider motorized tricycles; the sales volume difference between peak and off-season is large, and in the peak season, rent vehicles for delivery. For delivery personnel, set wage standards, mainly based on indicators such as quantity, weight, or volume of goods. Or, according to the actual situation, suggest that drivers contract, or introduce relevant incentive policies for drivers, such as giving the driver a commission of 70 yuan for the first trip, and increasing the commission by 10 yuan for each subsequent trip to stimulate the driver's enthusiasm. In addition, scientifically plan routes and customer types, plan delivery routes accordingly, set minimum delivery standards, and improve vehicle full-load rate. Then, set corresponding delivery cost standards based on different route distances and customer types, so that delivery personnel feel balanced. For example, the table below: The specific standard setting and measurement indicators should be formulated according to the company's actual situation to achieve the goal of effectively optimizing efficiency and reducing logistics costs. The above five points are the five directions for distributors to control costs. I hope distributor friends can use the above methods to reasonably control expenses, reduce business costs, and achieve the goal of increasing profits.