On October 24, 2018, at the "2018 China FMCG City Distribution Logistics Conference" hosted by New Distribution, Mr. Fu Chifeng, Deputy General Manager of the Marketing Center of Cloud Warehouse Distribution, delivered a keynote speech titled "Thoughts on Key Factors of Unified Warehousing and Joint Distribution." New Distribution has organized the speech content as follows for our readers.

We have been focused on FMCG logistics for over a decade, originally doing traditional third-party logistics. Three years ago, we began considering a transformation to city distribution, building on our existing business. Over the years, as Mr. Chen mentioned, we have stepped on many mines and fallen into many pits. At the beginning of this year, we even stepped into the biggest pit in the country.

Unified warehousing and joint distribution is a hot topic nowadays. Recently, we have been thinking about how to do it well. Our failures over the past few years have bought us many lessons and we have paid a lot of tuition. We have always been doing traditional logistics operations, so today I will talk from an operational perspective about the practical content under warehousing and distribution integration, including some cases.

Where are the key factors of unified warehousing and joint distribution or city distribution? We are still here, and we are not very successful yet. We are just sharing our thoughts on where the key factors are.

The host just mentioned the trillion-yuan city distribution market. Why are there no unicorns in the 2B field? What should we do to run in that direction and squeeze into the unicorn ranks? Everyone is talking about unified warehousing and joint distribution. Third-party logistics companies, warehousing and distribution logistics companies, and former distributor friends are all transforming. Why are the results not good? In the past two years, we have communicated a lot with industry distributors and city distribution peers. Why? Is profitability a false proposition? A previous guest shared that only 1% are profitable. Is this a false proposition? We have also been arguing and thinking about this.

Currently, we are doing unified warehousing and joint distribution, including ourselves and what we know. Traffic mainly comes from two aspects: one is price reduction or dimension reduction to attract traffic; the other is partnering with distributors to bring their traffic in. Is this the right approach? I don't know. If you simply piece together these traffic sources into your unified warehouse without adding more content, then it is soulless; it is only physically pieced together.

After recent internal debates and discussions, we have formed a consensus: We cannot make money from distributors; let distributors make more money, and we cannot make money from distributors. Because distributors themselves have already achieved unified warehousing and joint distribution. Since they represent multiple brands, few have a single brand. Many have several brands, some have three or five, and some have large volumes, with two or three hundred million in revenue. Theoretically, they have achieved "unified warehousing and joint distribution," but only for themselves, not shared. Once they open up for sharing and scale up, it involves re-planning, equipment investment, payback time, and investment costs. Why can't we make money from distributors? Because they have achieved the extreme. Whether it's warehouse costs, personnel, or vehicles, if we stand from our perspective, we hope to move toward the unicorn direction, so our operations are standardized, and the cost of standardization is high.

Therefore, to do well in unified warehousing and joint distribution at the distributor level, we propose that we must have an enabling mindset and capability. The so-called mindset is to have the mentality of achieving others, helping distributor friends. If there are distributors with this idea and ready, we can try to help them achieve unified warehousing and joint distribution. With this capability, we need to empower distributors from multiple angles. It is not to say that Cloud Warehouse Distribution alone can achieve all empowerment; of course, it requires support from industry resource parties.

For example, empowerment should be "three-dimensional" from two dimensions: depth and breadth. In depth, we summarize seven aspects. The first is basic logistics. Distributor friends have already done this with very low costs; we definitely cannot beat them, but we can help them with standardized operating systems. First, empower in management, making your energy more focused, stripping away your logistics burden, and making your energy more focused on sales. Later, there is a case: a medium-sized distributor in our warehouse saw good results after half a year.

The second is systems. In the morning, someone shared technical system support. Distributor friends will do commercial flow in the future. When you do it on a small scale, there may not be a big pain point, but if you want to grow, can your logistics support the commercial flow? A visualized logistics system is very key, including your online ordering tools. Should you have your own or use the more common third-party ones? This is a question. So from this angle, we help distributor friends achieve this support, and the key is that it is free.

Third, empower from a risk control perspective. Many distributors, when doing business, we have learned that quite a few distributor friends do not have risk control measures. For example, do you have insurance for your property? Do you have corresponding insurance for your on-site operations and personnel? If you want to standardize and grow, you must do prevention and control.

Fourth, your management system, including your standard operating system, for each new point, new warehouse construction and opening, the entire set of standardized management systems.

Fifth is financial empowerment. Is there supply chain finance to help you empower and let distributor friends grow? We have encountered, for example, alcohol, especially beer customers. We also do beer customers. They have heavy pressure to stock up at the end of the month. Half of a month's orders may arrive at the distributor's warehouse in the last three days, either causing warehouse overflow or insufficient funds. This is a funding issue. Sixth, finally, through the system, achieve big data accumulation and feed it back to distributors. Which categories are selling well, which types are selling well, can be transmitted to brand owners to aid supply chain decisions.

In breadth, empower all participants in the link from FMCG finished products to retail terminals. Today, mainly distributors. From the perspective of commercial flow trading parties: distributors, we can let distributors focus more on commercial flow, we provide logistics support, and provide corresponding system tools and mall trading tools. Second-tier wholesalers are in an awkward position now, but they are also very valuable. We can help them transform to focus on distribution, focus on building transportation capacity, and they can also become front warehouses or store warehouses. For retail terminals, we can also provide real-time distribution and credit financing.

Case Sharing

Xiamen DC, a 14,000-square-meter warehouse, has about 17 distributors, with over 5,000 SKUs. I won't read the data one by one. Originally, it covered 5,000 terminals. After integration, including distributor friends growing after entering the warehouse, the number of terminals increased by 20%. One distributor, with a small scale, originally represented only one brand, water and beverages, and only delivered to second-tier wholesalers, basically not to terminals. The area was 1,800 square meters, and the demand for funds was strong. After our support upon entering the warehouse, in less than half a year, they added a water beverage brand and a snack food brand, achieving direct terminal delivery, expanding to 600 terminals for direct delivery. Return loss: originally, when they did it themselves, because water beverages are low value, small shops' returns were not sorted; they either threw them away or distributed them as benefits. After handing over to us, we receive returns, re-sort them, repackage them, and reduce this loss. Including supply chain financing, we also introduce third-party institutions to help solve end-of-month supply chain financing.

This is our first time participating in the New Distribution 2018 City Distribution Logistics Conference. Let me give a brief self-introduction.

We were established in 2006. This company was renamed from the original. We have been doing FMCG for over a decade, focusing on the FMCG field, committed to building a national multi-level distribution network. Currently, we have set up a three-level network: national trunk lines, provincial distribution, and city distribution, providing customers with integrated solutions for direct delivery to retail terminals, through technology, overlay settlement, transaction matching, supply chain finance, and other services.

This is our current status. We now have the ability to cover 600,000 terminals, distributed across more than 30 warehouses nationwide, some in provincial capitals and some in third- and fourth-tier cities. We have 68 branches nationwide, all self-operated.

Finally, let me share our system. Our system is a "Qiansun" system that just went online at the beginning of last year. We hope to lay out 1,000 cities in the future, whether self-operated or in cooperation with local partners. The falcon is the bird with the best eyesight. We hope this system can help customers achieve a fully transparent and visualized management system in the future. Version 1.0 covers OMS, TMS, WMS, and BMS. OMS connects with all mainstream inventory and sales software of distributor friends, such as Yonyou, Kingdee, and Guanjiapo. We have a standard interface that can fully achieve this. BMS automatically generates billing. The key is that we can provide it to some partners for free.

Now we are also upgrading to version 2.0. Version 2.0 will add support modules such as mall transaction matching, supply chain financial services, and a no-vehicle carrier platform.

We set up this platform hoping to use the logistics line, with internet technology as the thread, to achieve deep integration of online and offline for all participants in the chain. Resource parties bring in their advantageous resources, then our commercial flow trading parties put your orders and goods on it, put distribution orders on it, and finally form transactions online and offline. Finally, credit status, collective procurement orders, and moving categories are fed back to resource parties and commercial flow parties to support everyone in growing the business. Distributors grow the business, and we share the extra part.

That is my sharing. Today is very fortunate. This is our first participation. We have set up a booth in the entrance corridor. Interested friends can come and discuss together.

In summary, this road is indeed difficult. Internally, we call it the bitter fighter in logistics. Friends who are interested in doing this can discuss with each other. Thank you!

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