The development of the times always replaces traditional models with more efficient ones. In recent years, all enterprises have been seeking new models that are "more economical, faster, more abundant, and better."

Let's look at the industry changes related to distributors over the past three years:

2014: The real economy generally struggled, with declining sales.

2015: The "Internet+" strategy was promoted, and the change related to distributors was the rise of numerous B2B platforms, making 2015 a golden year for B2B.

2016: "Supply-side reform" was proposed, and the change related to distributors was the emergence of unified warehousing and shared distribution.

2017: The "artificial intelligence" strategy was adopted, and new retail became a hot topic that year.

From the above developments, we can identify some patterns: B2B platforms, unified warehousing and shared distribution, and new retail have respectively restructured business models in the three areas of "transaction," "logistics," and "stores," moving towards more intensive development.

In 2018, what did we talk about most? — "Digitalization"!

What is the greatest value of digitalization? It is innovation-driven, using digitalization to improve efficiency, reduce costs, and enhance consumer services.

This year, through digitalization, we can push our business models or organizational structures to be more "extreme," that is, to go "deeper." In the first half of the year, the market seemed relatively "low-key" with no major moves, but in reality, everyone was deepening their efforts.

In the next two years, distributors will become another hot commodity after "small stores," because many national innovative models have already achieved initial success. For example, national B2B platforms, national urban distribution logistics, and a new generation of manufacturers need to quickly implement their national strategies, which requires grafting onto a large number of capable local distributors.

"Efficient operations" will become an important criterion for giants to measure distributor capability, and it will also become the biggest differentiator among distributors. It will be very important for future distributors and will become a new label for new-era distributors!

From the perspective of the industry chain, let's first look at the following diagram:

From ancient times to the present, the business industry chain has always been from raw materials -> production -> distribution -> retail, finally reaching consumers. No matter how the business model changes, the underlying business logic cannot change.

Some may disagree, but if you think carefully, the underlying logic cannot be bypassed. It's just that some channels are "self-built" and others are "grafted" onto others.

But now there is "consumption upgrade," and the chain has become the following diagram:

The supply-demand chain pipeline above has become clearly asymmetric. The key is the upgrade of the "consumption pipeline", which causes goods flowing from the "production" pipeline to not fully reach consumers, leading to "declining sales" and "overcapacity" for manufacturers, distributors, and retailers. As shown below:

The upgrade of the entire chain caused by consumption upgrade is a "collaborative" relationship, not an individual one. That is, doing well yourself does not mean your business will steadily rise; there will still be backflow.

Pipelines that improve slowly will be eliminated or replaced, but while improving yourself, you still need to patiently wait for other pipelines to improve.

It's like the three-legged race: you need to run fast yourself, but also coordinate with others to run fast. It's very difficult, and success takes a long time.

Only by raising all pipelines in the industry chain to balance with the consumption pipeline can we once again achieve a "supply-demand" ecological balance across the entire industry chain. This is a long process and one that requires the joint efforts of the whole society, as shown below:

"Transformation and upgrading" requires social division of labor. Manufacturers need to make their "products" extreme — "heart-stirring"; retailers need to make their "experience" extreme — "comfortable"; distributors need to make their "delivery" extreme — "speed."

Only by making each pipeline "extreme" and joining forces can such transformation and upgrading align with the true essence of playing in the ecosystem. Since we define the Internet era as an "ecosystem" and "platform" game, it is an era of win-win, symbiosis, and coexistence, not one of domination or eliminating intermediaries.

As distributors, they play an important role in the delivery of goods throughout the pipeline. In this transformation and upgrading, the industry chain's requirement for the "distributor pipeline" must be "the speed of precise service"!

Only by achieving "efficient operations" can distributors realize "the speed of precise service."

Many say that Chinese enterprises have undergone over a hundred years of reform in management and are already highly efficient, reaching the ceiling. But I believe that the distributor group is far from reaching the ceiling of efficient operations, and there is still much room for improvement. The main reasons are the "boss's" cultural foundation and the ease of making money in the past, leading to insufficient awareness of efficient management. Even now, management remains extensive, with rising internal costs and low efficiency.

Seeking a model that is "more economical, faster, and more accurate" to replace the current one, "cost reduction, efficiency enhancement, and efficient operations" are the most effective, direct, and controllable transformation and upgrading ideas for distributor profit growth.

Digital technology and artificial intelligence applications can bring significant improvements to distributors, ultimately achieving the mission of "the speed of precise service."

Distributor costs include not only product costs but also personnel costs and warehousing and logistics costs. AI technology does not simply "replace" a certain link but reshapes the workflow with higher efficiency.

For example: Traditional warehouse picking (order picking) involves a picker using a small cart and a picking list to pick goods from storage locations, and then a rechecker performs a second check.

If the picker's "small cart" is equipped with AI technology for weighing and video, and the cart is connected to ERP data via the internet, it can detect whether the picker has taken too many or too few items, eliminating the need for a rechecker position. This saves labor costs and reduces rechecking time.

Another example: In traditional warehouses, all personnel have busy and idle times. During idle times, they "wait" for tasks (possibly waiting for others to assign tasks or waiting for others to finish before they can proceed). "Waiting" is a waste of resources, and this waiting is fragmented time. Accumulated, you'll find that each person's actual effective working time is only about 50%.

When is warehouse personnel efficiency highest? When their hands and feet are continuously and effectively working (excluding rest times). When is logistics vehicle efficiency highest? When the wheels are continuously and effectively rolling.

Grasping this principle, we can use digital technology (handheld terminals, voice interaction, logic algorithms, etc.) to improve, reasonably allocate each person's work, and fully utilize fragmented time.

For example: Each person has a smart PDA. Through big data, the system calculates each person's work status ("idle" or "busy," what they are specifically doing) and pushes new tasks to idle personnel, similar to ride-hailing or food delivery dispatch.

Warehouse operations can be upgraded from "experience-based finding" to "navigation-based finding" through AI technology. New employees can start working within 15 minutes, using voice navigation to find goods in the warehouse, just like drivers only need to follow navigation without knowing the roads.

Digital technology combined with AI applications can increase overall warehouse efficiency by more than 35% while reducing warehouse personnel by 30%.

Digital technology can also significantly improve logistics dispatching. Previously, distributor logistics delivered along fixed "routes." With data technology and AI applications, visual dispatching can be achieved, delivering based on store density, reducing logistics costs and greatly improving delivery efficiency.

From 2015 to 2018, Medline conducted digital technology and AI application reforms and upgrades for over 100 large distributors, achieving significant efficiency gains.

Below we list some examples of distributor transformation and upgrading results

On August 22, 2018, at the FDIC2018 China FMCG Digital Innovation Conference organized by New Distribution, Medline will share with everyone how to make distributors "faster, more accurate, and more economical" through the application of digitalization within distributors.

★ Special Session on Efficient Distributor Operations ★

Strengthen yourself, graft onto others, and that is the platform, that is the ecosystem!

The development of the times always replaces traditional models with more efficient ones. "Efficiency is King" is the core of distributor transformation and upgrading.

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