---
title: "FMCG Entrepreneurs: A Practical Case of Regional Central Warehouse and Distribution"
description: "Central warehouse and distribution (统仓统配) has been a hot topic, with many FMCG dealers entering the field. This article shares the practical experience of Hubei Tianlu Smart Logistics, which achieved break-even in about 1.5 years, and discusses key strategies for finding warehouses, people, and goods, as well as insights on scale, pricing, and delivery."
author: "袁来"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2019-08-17"
language: "en"
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# FMCG Entrepreneurs: A Practical Case of Regional Central Warehouse and Distribution

> Central warehouse and distribution (统仓统配) has been a hot topic, with many FMCG dealers entering the field. This article shares the practical experience of Hubei Tianlu Smart Logistics, which achieved break-even in about 1.5 years, and discusses key strategies for finding warehouses, people, and goods, as well as insights on scale, pricing, and delivery.

Click to read the original text for details.
Central warehouse and distribution has been a hot topic in recent years, with many players entering the field, mostly those with FMCG experience, especially dealers.
So far, whether transitioning to central warehouse and distribution or extending business scope to include it, many have encountered various problems. This has caused psychological burden for those outside the field who are eager to try. Can central warehouse and distribution work? How should it be done?
Central warehouse and distribution is a brand-new business, no less than starting from scratch. Whether for those wanting to enter or those already in, letting go of past successful business experience, shedding the burden of existing resources, and returning to the essence of business may help you walk this path more calmly.
If you face it with an entrepreneurial mindset, you may respond more calmly, after all, it is a startup, and startups are never without twists and turns. Recently, New Distribution had a conversation with Mr. Peng Nenggang, General Manager of Hubei Tianlu Smart Logistics Co., Ltd., who has been in business for over a year.
In March 2018, the central warehouse and distribution project was initiated, and warehouse leasing was completed in May. To date, in 1.5 years, with a 12,000m2 warehouse, they have 27 clients, and it is expected to achieve break-even in August.
Excluding the middle rectification period, Tianlu Logistics has actually been operating for about 1 year. Achieving break-even in such a short time is rare. Although Tianlu Logistics cannot yet be considered truly successful, after communicating with Mr. Peng Nenggang, it was found that the experience gained over this year is worth thinking about and learning from for the industry.
Therefore, this article focuses on Tianlu Logistics' entrepreneurial journey, discussing how a "newcomer" can practice central warehouse and distribution. What are the differences from other practitioners in key points, and why operate this way? I hope to provide some inspiration for those who have entered or are about to enter the field.
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> ****Core Reading:**************01 From 0 to 1: The Three Steps of Entrepreneurship********02 Stop Loss and Increase Revenue: Establish Relatively Standard Services********03 Key Points on Scale, Pricing, and Delivery******
**From 0 to 1: The Three Steps of Entrepreneurship**********
Entrepreneurship is hardest at the beginning, especially in urban distribution. Although FMCG urban distribution has been "advocated" for years, there has been no benchmark enterprise or a complete FMCG urban distribution company to reference. Peng Nenggang explained that a typical feature is that there is currently no enterprise with annual revenue of 50 million yuan in this field.
**With no benchmark and being a startup, Peng Nenggang regards the from-0-to-1 stage as "pioneering." The three most important things in the pioneering stage are: finding a warehouse, finding people, and finding goods.**
**1\. Finding a Warehouse**
What kind of warehouse is most suitable? Should high-level shelves be installed in the early stage?
Peng Nenggang told New Distribution, "In Wuhan, I looked at nearly 20 warehouses, covering almost all 14 administrative districts. Currently, Tianlu Logistics' warehouse is 15 kilometers straight-line from Wuhan's first ring road, with a highway entrance 2 kilometers away, ensuring easy entry for incoming goods and easy exit for city goods."
In terms of warehouse cost, it is highly cost-effective at less than 20 yuan/m2. In Wuhan's third ring area, it has an absolute advantage. The best and most straightforward way to find a warehouse is to run around, look, and search more!
For the 10,000m2 warehouse, Peng Nenggang also did a comparative analysis: large dealers in Wuhan average 5,000-6,000 square meters. If Tianlu Logistics' warehouse were smaller, not even as big as others', there might be no chance to negotiate cooperation with dealers.
Not installing high-level shelves, especially in the early stage, is because of high costs; installing high-level shelves means needing high forklifts, and possibly investing millions in hardware before any business is done. Also, in the early stage, trial and error is inevitable; with three-dimensional shelves, a relatively standardized service system may be needed.
Whether hardware or software, looking high-end may become an obstacle in the early stages of entrepreneurship. Peng Nenggang revealed that the company introduced the "Chengneng Henghe" warehouse management system only at the beginning of 2019. Only after preliminary exploration is complete can the system be introduced to achieve twice the result with half the effort.
**Therefore, behind high-level shelves is not just cost, but also a standardized warehouse management system. It is better not to install them in the early stage.**
**2\. Finding People**
Regarding finding people, Peng Nenggang said that in the initial team building, people were the hardest to recruit. There was no decent office, no stable business, an empty warehouse, rented equipment, and it looked like a "shell" company, with concerns about whether salaries could be paid.
One thing Peng Nenggang still remembers: when recruiting a financial staff member, the person came to the warehouse to fill out a resume, filled half, and left without a word or a goodbye.
Peng Nenggang believes that in the early stages of entrepreneurship, don't be picky; first get three to five people moving, set up basic departments, and then optimize. Tianlu only recruited 3 people in the first half month, one of whom was an acquaintance.
How to find middle managers? **Although FMCG urban distribution belongs to the logistics industry, when finding people, you should not first look for those with logistics experience, but first for those who understand FMCG. The best people understand FMCG, trade, systems, logistics, and management.** Of course, such managers almost do not exist.
Peng Nenggang told New Distribution that FMCG urban distribution is a very niche segment, and there is no ready-made person to use. For example, for the operations manager position, four people were replaced in one year. The first three were professionally trained and excellent in their original companies, but they did not understand FMCG or trade, so coordination was difficult. Even if they worked hard, they could not hit the mark.
Regarding partners and shareholders, currently the two shareholders of Tianlu Logistics are super large dealers in Wuhan: one is a dealer for Moutai, Wuliangye, and Baiyunbian; the other is a dealer for Jingjiu. Peng Nenggang himself has years of experience in FMCG sales management, and another partner is the former head of the Hubei distribution station of the Sugar, Tobacco, and Wine Weekly. Thus, the partners have rich commercial resources, which has played a key role in the next step of attracting investment.
Many local dealers transitioning to central warehouse and distribution think they have many dealer resources, but in fact, opening a business requires not only dealer friends but also financial strength and social status. Also, central warehouse and distribution involves cross-category warehousing and distribution, not just alcohol and beverages. For example, being famous in the beverage dealer circle may mean nothing in the condiment or grain and oil circles. Whether partners or shareholders, resource complementarity is needed in the mix.
**3\. Finding Goods**
Finding goods is like finding people; the first three are the hardest.
Peng Nenggang recalled that the first three clients were: one was a relationship from the investment manager, a dealer for Xizhilang; one was a dealer for "Youyongjiu" (a liquor brand), a former colleague of mine; and one was a dealer for C'estbon water.
The hardest to negotiate was the Xizhilang dealer, which took two months, almost three or four rounds per month. With nothing to show, the dealer did not trust and feared we might run away.
To attract dealers quickly in the early stage, Tianlu Logistics did not adopt a standardized charging method but used the simplest and most straightforward approach: calculating costs with the client.
The dealer's current warehousing and distribution costs, location, personnel wages, vehicle costs... add them all up, then calculate the total sales volume in pieces, and finally give a price acceptable to both parties. Peng Nenggang told New Distribution that since the company has opened for business, hired people, and rented a warehouse, early losses are inevitable.
In the early stage of attracting investment, do not design too many rules and standards. If business does not come in, no amount of rules and standards will work. Once business comes in, provide good service, optimize business standards during service, train the team, and iterate through trial and error.
Summarizing Tianlu Logistics' "Three Steps of Entrepreneurship":
> **Finding a warehouse—cost and location are the core basic considerations. Other hardware and software can be set aside for now; let the business move first, then gradually introduce them. The introduction of hardware and software is also a process of continuous trial and error and iteration of the business model.**
>
>
>
>
> **Finding people—recruit grassroots employees first, then optimize; middle managers should understand the industry and distribution, and be gradually cultivated. Without familiarity with the business scenario, even strong professional skills may not be applicable; senior partners should complement each other in funds and resources.**
>
>
>
>
> **Finding goods—cost calculation method. Only with business operation can there be operational data; with data can problems be identified; with problems can solutions be found.**
Peng Nenggang told New Distribution that the "pioneering" stage took about 1 year to achieve basic business operation. The second stage is roughly from June 2018 to December this year. Currently, Tianlu Logistics is at the end of the second stage, with the core goal of completing two things: **first, stop losses and increase revenue; second, establish relatively standard services.**
**Stop Loss and Increase Revenue: Establish Relatively Standard Services**
Peng Nenggang said that from the financial data of June and July, monthly revenue has increased and losses have decreased. Based on current data, Tianlu Logistics will achieve break-even in August.
**Stopping losses and increasing revenue is a result, not a goal.** To achieve the goal, corresponding process measures must be taken, and this process measure is to establish relatively standardized services.
Tianlu Logistics has two red-line principles: **1. No cash on delivery; 2. No participation in transactions.** In addition, in the cooperation and division of labor process, Tianlu Logistics requires all cooperating dealers to designate one and only one contact person. Unified caliber, unified information transmission path, all matters communicated through the contact person, order issuance, order receipt, financial data, and goods data. Instructions from anyone other than the contact person are not accepted.
According to Peng Nenggang, from June 5 to August 6, 2019, Tianlu Logistics drafted a notice in the company's name, issued to cargo owners, informing them of the standards and details of warehouse management and transportation distribution, what cooperation is needed from customers, and the process, so that customers can understand at a glance.
In terms of charging standards, since the early stage was "customized on demand," it was relatively rough. Later, Tianlu Logistics designed relatively standardized charging details based on different categories. With 30 clients, divided by category, 4-5 major categories (alcohol, beverages, condiments, general merchandise, etc.), with one charging detail per category.
In terms of billing methods, Tianlu Logistics also tries to simplify: **one is per-piece charging; the other is per-ton charging,** for example, C'estbon water, a high-volume, single-product type. (The specific charging logic is explained below.)
In the first two stages, the pioneering and sorting stages, according to Peng Nenggang, in December this year, Tianlu Logistics will enter the **refined operation stage**, with three core tasks: **first, extend supply chain financial services; second, international freight forwarding for import and export trade; third, start cold chain urban distribution business.**
**About Scale, Pricing, and Delivery**
The above is the overall path of Tianlu Logistics from 0 to 1. Of course, this is not enough; we must understand the logic behind Tianlu Logistics. The so-called know the how, and know the why.
**1\. Scale**
Many dealers transitioning to central warehouse and distribution like to talk about scale, thinking that scale naturally brings benefits, calling it "strategic losses." **From an industry perspective, urban distribution must emphasize scale effects, but when it comes to a single city and a single entrepreneurial entity, even with capital backing, it is recommended to put aside scale first.**
Since it is entrepreneurship, forget about scale, efficiency, and data; first treat it as a business. The essence of business is to make money. A business that does not make money will never bring sustainable development.
**Keep scale in mind, but talk about making money. This is the tone to set at the beginning of entrepreneurship in central warehouse and distribution.** Also, never think that because you have sufficient resources, you can do it. Resources will never be the key factor in your success; at best, they are just an extra can of fuel.
**2\. Pricing**
I find it strange that every time New Distribution invites experts or entrepreneurs in central warehouse and distribution to share in the community, during the Q&A, the same question is asked: "How do you charge?"
"Is the charging method that important?" The charging standards in the early stage of entrepreneurship and in the middle of operation are not the same. Are they worth referencing? Moreover, others' charging standards may not suit you, and they may not be correct.
Regarding pricing, how should it be considered? First, the charging standard during a stable business period has no reference value. Only looking at others' successful practices, you will never find what suits you.
In July, in Shanghai, I visited Mr. Yang Qiming, co-founder of the regional B2B platform Kuaile Zhanggui. Regarding operations, one thing impressed me deeply: **When each order is generated, I immediately know whether I am losing or making money on that order, how much loss or profit, and I can know right away.** (Note: New Distribution will later write a separate article detailing "Kuaile Zhanggui")
When communicating with Mr. Peng Nenggang, he also told me that regardless of the product, high or low value, heavy or light, when the product is placed on the delivery vehicle, I know how much money this order will make. Charge the cargo owner a certain fee, give the driver a corresponding fee, and reserve a portion for myself.
Therefore, whether charging per piece, per volume, or per weight, the core goal of designing charging standards is: **clearly know whether this order makes money, how much, even if it is just breaking even. Although warehousing and distribution is a service, the service must be quantified. Only quantified data can guide business operations.**
**3\. Delivery**
Almost 90% or more of central warehouse and distribution entrepreneurs use their own vehicles and drivers for delivery. But both Kuaile Zhanggui and Tianlu Logistics adopt a "contract system" with contracted vehicles and drivers.
According to Peng Nenggang, in the early stage, Tianlu Logistics adopted various forms: a small number of self-owned vehicles, plus social idle vehicles, plus some strong local carriers. **In the future, Tianlu Logistics will completely eliminate self-owned vehicles and drivers in the delivery link, adopting a cooperative model between parties.**
At this point, the driver is an individual entrepreneur. Tianlu Logistics can provide stable business: if the driver wants to earn more, they can work from 6 am to 8 pm; if they want to be relaxed, they can work from 8 am to 5 pm, and even if they don't come one day, it's fine. This form saves a lot of management and communication costs.
In addition, in Peng Nenggang's plan, regarding vehicles, Tianlu Logistics will adopt a "double leasing" model. Tianlu Logistics will purchase vehicles in bulk from upstream automobile manufacturers or dealers at a lower price with installment payments. Then, to downstream contracted drivers, they will lease the vehicles on a monthly rent basis, with installment payments to the drivers.
Tianlu Logistics signs contracts with drivers, providing stable business volume, while training and constraining drivers, from dress code and speech to the use of hardware and software. Tianlu Logistics will set a set of standards. Of course, dormitories will also be provided. The ultimate hope is that Tianlu Logistics is a business platform where drivers "start businesses" on it. No fixed workload is specified; only corresponding reward standards are set, with more work leading to more pay.
The benefit of this is **to use market-oriented methods, control processes through systems and management, reduce management costs and potential labor risks, and let drivers improve work enthusiasm through business partnership.**
**Final Thoughts**
FMCG urban distribution is a tough bone to chew. Tianlu Logistics is not yet successful, but achieving such results in 1.5 years with its own understanding and approach is not easy.
I asked, "Mr. Peng, compared to other FMCG urban distribution startups, what advantages do you have?"
He said, "In the early stages of entrepreneurship, don't design too many rules and regulations; strict standards and systems are too idealistic. First, put aside industry dividends, trends, and scale, and keep trying and testing. Do whatever works! My approach may be a bit wild, mainly thinking about surviving first. If you can't survive, no matter how beautiful the words, it's useless!"
He continued, "Recently, I've been reading Huawei's 'Based on Strivers'. I think the history of entrepreneurship is a history of struggle, inseparable from every participant who strives for it: the team, shareholders, partners, and the customers who trusted and supported you from the beginning!"


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