What kind of enterprises are lost in the 'old world'? Everyone knows cycles exist and that we live within them, but not everyone or every enterprise can successfully cross them. The cycle for grass and trees is mostly one year. The difference is that herbaceous plants mostly wither every winter, while trees can cross winters, turning each winter into a growth ring, even spanning millennia. An enterprise that has not crossed a cycle cannot be considered successful. Only those that have traversed multiple cycles can be considered excellent. Every century-old enterprise in the world has successfully crossed multiple cycles.
Today, no matter from which angle we look, we seem to be entering a 'bad cycle.' First, over the past three years, the global situation has undergone tremendous upheaval. Three years of pandemic, the Russia-Ukraine conflict, and US-China decoupling have caused severe fluctuations in commodity and energy costs, with no improvement in sight in the short term. Second, with US interest rate hikes, consumption in the Western world continues to shrink, and exports from the East are hindered. China's production capacity is returning to the domestic market, intensifying competition. Third, China's population has entered an era of negative growth, with rising labor costs and a shrinking consumer base. This rise and fall will fundamentally change the future market direction.
In light of these dramatic changes, Mr. Hou Xiaohai, CEO of China Resources Beer, first publicly proposed the 'New World' on November 3, 2022, which resonated collectively among Chinese FMCG enterprises. On March 3, 2023, at the '2023 Consumer Goods Supply Chain Ecosystem Partner Conference,' facing over 300 supply chain executives from FMCG companies, Liang Pengfei, President of Anneng Zhilian, also delivered a speech titled 'Co-build, Co-create, Co-share: Finding the Power of Enterprise Evolution.'
Thirty years east of the river, thirty years west. If the first thirty years after reform and opening-up were 'east of the river,' then today we are undoubtedly 'west of the river.' Being 'west of the river' is not the worst. The worst is that people have already arrived 'west of the river' but still yearn for 'east of the river,' and their thinking remains stuck there. The vast majority of enterprises that cannot cross cycles, lost in the 'old world' and unable to reach the 'new world,' have this problem.
Where is growth in the new world? Growth thinking is certainly the primary thinking for survival in the new world. Over the past three years, everyone has been extremely difficult. Companies that set their goal merely as 'survival' did not usher in a new life in the spring of 2023. But those that kept their eyes on growth, seeking growth no matter how hard it was, many not only survived but thrived, and after the spring of 2023, they achieved even greater development. Many have forgotten that 'pursuing growth is the natural and eternal mission of an enterprise,' and this mission does not change with the environment or competition. Business results may lack growth, and even declining sales can still keep a company alive; but without growth thinking, without the confidence and courage to pursue growth, a company will surely die.
So the question arises: where is growth in the new world? Growth in total market volume has peaked. In the era of stock, do not have high expectations for economic growth, consumers' pockets, or consumer confidence. Possible growth in the stock era comes first from new demand stimulated by product innovation, and second from share grabbing—a zero-sum game. This article does not discuss product and brand innovation; innovation dividends are a gift of fate to a few, and not everyone has that ability and luck.
With the super development of mobile internet, every consumer purchase is dispersed to any possible niche scenario and channel. The core of share grabbing is to appear at any place and time where consumers might consume, seizing any possible sales opportunity. This is the most essential description of omni-channel competition. Whether or not products and brands can innovate successfully, the main growth in the 'new world' must come from broader, more random, and more fragmented omni-channel growth. No one is unwilling to do business easily, but the era of easy business is clearly over. Today, almost all growth comes from the increasing number of omni-channels. Facts also prove that enterprises specializing in a few channels have not seen decent growth in recent years. Today, any enterprise with growth thinking cannot abandon omni-channel growth. Omni-channel growth methods and strategies have indeed become a prominent discipline among Chinese FMCG enterprises.
Increasing revenue without increasing profit is not quality growth. In the past, when forced to choose between sales volume and profit, most would choose sales volume. But in the omni-channel era, choosing either is wrong. The only correct answer is to have both sales volume and profit. In the era of market increment, using losses to gain sales volume could be recouped in the future. But in the stock era, every penny of profit you lose is a net loss. Sales that bring losses contribute almost nothing to the company's future, except to the salesperson's monthly KPI. Growth without profit is growth without quality, and such growth is meaningless today.
Omni-channel operations do bring incremental volume to enterprises. But precisely this incremental part is very difficult to profit from. One reason is the traffic cost of omni-channel operations. Today's internet has no traffic dividend. Every user is priced, and the highest bidder wins. To appear before users, you must pay, and rising traffic costs eat into profits. The second reason is the fulfillment cost of omni-channel orders. Channels are increasingly fragmented, orders are smaller and more complex, and fulfilling each omni-channel order has become a huge challenge. Today's 'thrilling leap' no longer refers to successfully selling goods through all channels. It means not only selling the goods but also delivering them at lower cost and faster efficiency, and making money back—only then is the 'thrilling leap' complete. The 'thrilling leap' of omni-channel operations tests not just sales ability but also excellent omni-channel fulfillment capability. Without a supply chain system adapted to omni-channel, and without simultaneously achieving both revenue and profit growth across channels, sustainable quality growth is impossible.
New supply chain empowers omni-channel quality growth. Every enterprise's marketing department is using business to force its supply chain to transform. Their complaints about the supply chain department grow daily: Why are those SKUs out of stock again? Why is there so much inventory of these SKUs? Why is the shelf life so poor? Why are your costs so high? Why haven't the last live-streaming bestsellers been shipped in 5 days? From the perspective of fierce market competition, each complaint is understandable. But the supply chain department, facing increasingly fragmented and complex omni-channel orders and cost assessments, indeed has grievances it cannot express.
There are only three criteria to measure whether an enterprise's supply chain system transformation is successful: Is the response speed of omni-channel fulfillment getting faster? Is the tolerance for fulfillment requirements increasing, and is compatibility improving? Are the resource occupation and cost consumption of order fulfillment decreasing? In other words, is each omni-channel order fulfilled with lower cost, faster speed, and better experience? Building a supply chain system adapted to omni-channel competition is indeed difficult, but not impossible.
Uni-President also faced omni-channel order fulfillment issues but solved them through cooperation with Anneng Zhilian's 'one inventory' model. Previously, Uni-President, like other brands, used a one-store-one-warehouse model online. Later, they introduced Anneng Zhilian's online one-inventory shared warehouse model. After sharing one inventory, the system connected the entire chain of pre-sale, in-sale, and after-sale, improving consumer experience and reducing operating costs. According to Li Youqian, General Manager of Uni-President's Central Logistics Center, through cooperation with Anneng Zhilian, order fulfillment costs were reduced by 20%, a significant cost saving. In addition, Uni-President cooperated with Anneng Zhilian on an integrated warehousing and distribution model and plans deeper integration in the future. Li Youqian said, 'Previously, we managed warehouses, handling, and transportation. Now we have taken the first step: handing over warehouses and handling to Anneng. In the future, Anneng will also share its warehouses with us. For example, if we have 100 warehouses nationwide and Anneng has 1,000, then 1+1 becomes 1,100 warehouses serving our consumer end. This is a huge upgrade for the supply chain. The ideal future scenario is that our products are handed directly to a third party after leaving the production line.'
Not only with Uni-President, but Anneng Zhilian also has deep cooperation with more than 3,000 consumer goods enterprises, including over 100 first-tier brands such as Tsingtao Beer, Feihe Dairy, and Liby, helping these enterprises achieve true quality growth in the omni-channel era. For example, Anneng Zhilian's cooperation with Tsingtao Beer in e-commerce helped significantly reduce fulfillment costs, making Tsingtao Beer the number one beer brand in e-commerce and the only beer brand to achieve scale profitability. Another example: in the full-chain BC integration cooperation with Feihe Dairy, Anneng Zhilian enabled Feihe's products to flow most quickly through the distribution chain, helping Feihe become the milk powder product with the best freshness.
In the eyes of FMCG enterprises cooperating with Anneng Zhilian, it is a supply chain service provider that best understands brands, commercial flow, and B-end needs in the supply chain field. This capability is inseparable from Anneng Zhilian's background of being born from Midea Group's supply chain transformation. Anneng Zhilian has developed a proven and successful supply chain service model '1 (full chain) + 3 (production logistics, one inventory, integrated delivery and installation),' forming a basic software and hardware capability structure and operation system. It respects industry boundaries, focuses on industry characteristics, and deeply explores the pain points of the entire value chain, which is the premise for Anneng Zhilian to provide deep solutions for the entire value chain.
Thanks to this entrepreneurial background, Anneng Zhilian has a fundamental difference from ordinary production logistics or sales logistics service providers. It stands entirely on the brand owner's side, designing its supply chain service products from a full-chain perspective, including production logistics, trunk logistics, distributors, and consumers throughout the entire production and distribution chain. To build a digital system that connects the entire chain, Anneng Zhilian has established a professional IT team of over 300 people, with an annual technology investment of up to 120 million yuan, which is almost unique in the domestic supply chain service field. Today, Anneng Zhilian can connect from raw material logistics, down to factory-to-distributor, distributor-to-terminal, and online nationwide C-end orders. Regardless of the channel order or fulfillment requirement, it can mostly achieve the shortest chain, lowest cost, closest inventory, and fastest delivery. Omni-channel growth supported by such a supply chain is true quality growth.