---
title: "If the Logic of Self-Built B2B Doesn't Hold, What Should Brand Owners' Channel Digitalization Strategy Be?"
description: "This article discusses how FMCG brand owners can build a digital supply chain, totaling 7,800 words and about 20 minutes to read. It argues that channel digitalization is inevitable, but brand owners often lack systematic design for the entire channel, leading to digitalization for its own sake. The author proposes that brand owners should focus on two cores: diverse consumer demand and fragmented retail scenarios, and reconstruct the distribution channel using digital technology to build an efficient digital distribution network."
author: "赵波"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2019-07-15"
language: "en"
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# If the Logic of Self-Built B2B Doesn't Hold, What Should Brand Owners' Channel Digitalization Strategy Be?

> This article discusses how FMCG brand owners can build a digital supply chain, totaling 7,800 words and about 20 minutes to read. It argues that channel digitalization is inevitable, but brand owners often lack systematic design for the entire channel, leading to digitalization for its own sake. The author proposes that brand owners should focus on two cores: diverse consumer demand and fragmented retail scenarios, and reconstruct the distribution channel using digital technology to build an efficient digital distribution network.

Click to read the original text for details.
**This article discusses how FMCG brand owners can build a digital supply chain, totaling 7,800 words and about 20 minutes to read. It is recommended to read carefully.**
As we all know, channel digitalization is a major trend and an inevitable event. Every brand owner wants to achieve digital distribution, but the fact is that brand owners lack systematic design for the entire channel.
**In many cases, they may digitalize purely for the sake of digitalization, ultimately becoming a backup for an information system and fading away.**
I believe that brand owners' self-built digital supply chain should revolve around two cores: **First, the diversity of consumer demand,** considering the efficient turnover of long-tail products; **Second, the fragmentation of retail scenarios,** considering supply chain coordination after traffic distribution. Based on these two points, combined with digital technology, the entire distribution channel should be reconstructed to build a digital, efficient distribution network.
**Online and offline not sharing causes huge waste and conflict**
Take a typical beer industry analysis: a certain Q brand beer currently has two networks, the B-network supply chain and the C-network supply chain, with 90% of the inventory products being the same.
The brand's B-network supply chain has about 20,000 distributors, behind which are 20,000 warehouses, 200,000-300,000 delivery vehicles, and terminal service personnel. This is the cornerstone of the brand's sales guarantee.
On the C-network supply chain side, there are 8 JD warehouses and 7 Cainiao warehouses, which ensure the delivery efficiency of the brand's 2C business.
**But these two networks operate independently with no intersection. Whether from the company's internal organizational structure or external distributors and warehousing logistics, they are in a state of "well water not interfering with river water."**
This state leads to a series of waste situations:
For example, during this year's 618 shopping festival, JD and Alibaba sales surged, and a large number of products needed to be delivered from JD and Cainiao warehouses, some 200-400 kilometers away, "traveling by land and water," before finally reaching consumers.
However, it is very likely that within 10 kilometers of the consumer, there is a distributor's warehouse with tens of thousands of boxes of identical inventory lying idle.
Why go far for the same brand and the same product when it's nearby?
**The core of the problem is that the entire supply chain system has not been systematically coordinated and laid out for different channels.** Frankly speaking, almost all consumer goods companies in China that do deep distribution (note: not just FMCG, but all consumer goods) have not coordinated these two networks.
At the same time, as innovative retail scenarios become more diverse—B2B, community group buying, WeChat business, content e-commerce, video e-commerce, membership e-commerce, fresh food e-commerce—each retail format has different supply chain models, forcing brand owners to either not cooperate or, if they cooperate, to rebuild a new supply chain delivery system suitable for this new model.
**Not only is coordination impossible, but because the SKUs are the same and online prices are cheaper, another problem arises: price conflicts between online and offline.**
The author recently saw a very extreme case: a certain brand, every year during 618, because online prices are too low, seriously affects the stability of offline price system. Before this year's 618, regional managers jointly pressured the e-commerce department to temporarily remove main products. As a result, sales plans were severely disrupted during 618, and the entire 618 sales were lukewarm, being overtaken by competitors.
**Many companies are forced to try selling different products, specifications, and packaging online and offline.**
On the surface, this can be a one-time solution to effectively resolve online-offline conflicts, but we should also see that online and offline lose the opportunity for coordination. In a war, if the air force, army, and navy each fight their own battles without communication, what would be the result?
**Online and offline integrated integration to achieve rapid delivery**
At the beginning, the author mentioned that brand owners should systematically reconstruct channels based on diverse consumer demand and fragmented retail scenarios, and through reconstruction, build a digital, efficient distribution network.
**The way to reconstruct is to break the situation of internal organizational separation between online and offline, and the non-sharing and non-circulation of goods and warehousing. Only in this way can we adapt to future consumer changes and the integrated online-offline transaction scenarios in the new retail environment, achieving rapid delivery.**
So, what kind of supply chain model can achieve this? Three online, three warehouses, three networks, and middle-platform integrated coordination. Simply put, it is 2B2C online and offline one-inventory.
> **Three Online:** Inventory online, transaction online, data online
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> **Three Warehouses Integrated:** Central warehouse, city warehouse, front warehouse
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> **Three Networks Coordinated:** Sky network, ground network, human network coordinated distribution
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> **Middle Platform:** Backend supply chain, data, and organization folded and aggregated for integrated support

**First, "inventory online" is particularly important and is the prerequisite for everything else.** Because only with inventory online can efficient routing and allocation of goods be achieved; with inventory online, real-time transaction online can be supported; only with transaction online can data online be real-time and accurate.
To achieve three online, it is necessary to organize the three warehouses into a warehouse network, allowing goods to flow freely among central, city, and front warehouses.
When product inventory is online and can be freely allocated among the three warehouses, brand owners can systematically build a three-network integrated marketing and transaction method based on consumer behavior, ultimately achieving one-stop delivery. Create the shortest time, highest efficiency turnover, and maximum allocation.
How to achieve this goal?
Find a third-party supply chain company to strip out warehousing and logistics? That's not realistic. You might say the existing distributor system cannot be moved. The current distributor system is too large; no third-party supply chain company can handle such a high-density, large-scale FMCG supply chain. Second, even if they could, the logistics costs of distributors are not something any third-party company can bear.
In fact, it is not necessary to hand over all logistics to third parties. On the contrary, **distributors' warehouses are naturally the best front warehouses.** For brand owners, what needs to be done is to separate the logistics and business of distributors with a certain scale and information management capability, making logistics independent and becoming professional third-party city distribution logistics companies, achieving bus-style logistics distribution, and then using supply chain management systems to connect the separated warehouses with the brand's own central and city warehouses, putting inventory online.
In this process, some small distributors or second-tier wholesalers' warehouses cannot be independently separated, but that does not prevent their inventory from being connected online. Once distributors' inventory is real-time online and can be connected with central and city warehouses, it will greatly reduce product inventory and improve inventory turnover.
Currently, P&G's 2B2C one-inventory pilot in Yunnan has achieved significant results: logistics costs decreased by 10-20%, full load rate increased by 25%, inventory accuracy reached 99.95%, and annual labor costs for a single distributor saved more than 100,000 yuan.
(P&G and distributor supply chain coordination diagram)
**When inventory is online and third-party bus-style distribution is achieved, transaction online becomes simple. Brand owners only need to connect the front-end transaction system with the back-end supply chain system to build a 2B and 2C data-sharing transaction system. Offline salespeople no longer collect cash for small store orders but use mini-programs and WeChat Pay for online orders.**
Here, someone might ask: if warehousing and distribution are centralized, how is ownership of goods handled? In fact, does it matter who owns the goods? Once people and goods are separated, ownership becomes irrelevant. For example:
Suppose Budweiser has 8 distributors in Shanghai. In the past, these 8 distributors meant 8 warehouses, 8 sets of inventory, and 8 delivery teams. When these 8 distributors' warehouses are merged into one, the total warehouse area may only be one-third of the original, and total inventory may only be half. Moreover, ownership is actually separated from the goods themselves. Ownership is only clarified when the distributor places an order. When the goods are picked up, final settlement occurs.
We see many brand owners already trying this. In high-tier markets, they aggregate distributor inventory and centralize warehousing. For example, in Beijing, warehouses are no longer allowed within the Fifth Ring Road. So many distributors have to find warehouses outside the Fifth or Sixth Ring. If goods are delivered to within the Second Ring, logistics cause extreme pain for distributors.
If brand owners do not merge flows and do not find third parties for unified distribution, logistics costs are huge and unbearable. In high-tier markets, as commercial real estate prices rise, shared warehousing, shared logistics, and centralized same-city distribution are inevitable trends.
In low-tier markets? Because delivery radii are longer, order quantities per order are too small, and order frequency is too low, it is difficult to form bus-style logistics. So brand owners may still need to use distributors or second-tier wholesalers, but that's fine. As long as distributors' warehouses are managed in a standardized way and transactions are online, 2B2C logistics integration can still be achieved.
This is a huge project, but for brand owners, it's not a question of whether to do it, but when!
Brand owners must adapt to the changes of the times through this three-network integrated coordination, achieving efficient backend supply chain and flexible front-end consumer demand. They must implement "flexible delivery"; otherwise, they cannot adapt to this era.
**Fold the super complex supply chain into a "box"**
What is the deep significance behind this? I think Luo Zhenyu, founder of "Dedao," proposed a concept: **cognitive folding,** which is particularly instructive:
 _What made the US military win World War II, besides weapons, equipment, generals, and soldiers, was something decisive in the backend supply chain: Spam._
 _During WWII, American soldiers could consume at least 4,300 calories per day thanks to Spam. What about the German army, America's opponent? On average, 3,000 calories per person per day. The Japanese were worse, with only 2,000 calories per day, less than half of the Americans._
 _You might say, that's not surprising. Japan was poor, America was rich. America had vast territory, abundant grain, oil, meat, eggs, and milk, so soldiers ate well. But it's not that simple. This was a battlefield, not a market. You have national strength and sufficient supply. But the battlefield is ever-changing and extremely complex._
 _Think about it: during WWII, the US had over ten million troops, distributed across the European and Pacific theaters. Each branch, each unit, had different battlefields and missions, and many were on the move. If you were a US logistics officer, even with endless resources, wouldn't you go crazy facing this immense complexity?_
 _Not to mention other things, just feeding the troops on the battlefield—how would the logistics department do it? Would every squad have a cooking squad?_
 _Would that cooking squad need to bring ingredients? Pots and utensils? Fuel? How much of each? Too little and they go hungry; too much, and it's not a resource issue but affects mission execution. How do you ensure the right amount and structure of food and supplies are delivered to the right units? That's a big problem, right?_
 _Earlier we said Japanese troops only had 2,000 calories per day, not entirely because the country was poor or food resources were insufficient. It was also because they mainly ate rice balls made from rice. Even without meat and vegetables, just ensuring soldiers got rice balls was terrifyingly complex._
_You need to bring rice, right? You need firewood, a pot, and water to cook, right? Just these conditions are hard to meet on the battlefield. Moreover, cooked rice spoils quickly, so it can't be made in advance for long-term storage. And cooking squads can't just light fires on the battlefield; if smoke drifts out and is spotted by the enemy, they'd be wiped out. You see, in many cases, even if troops have rice and firewood, if it can't be delivered or is inconvenient to cook, soldiers go hungry on the battlefield._
 _Understanding this, look back at Spam and see its benefits._
 _Spam is canned cooked food, no extra processing needed. No cooking squad, no firewood, rice, oil, salt, utensils, stoves, or cooking timing—none of that._
 _It's not just about total calories, but also nutritional balance. Anyone who has done physical labor knows that after expending a lot of energy, just eating dry rations and carbohydrates is far from enough; you need protein and fat._
 _For Spam, this is not a problem; just change the recipe in the factory. A can of Spam contains not only meat but also starch, and you can add any other nutrients you want._
 _Moreover, there are transportation advantages. Spam is compressed in cans, making it very easy to transport, whether by ship, train, or air drop. It doesn't spoil and can last 3 years without refrigeration. Also, transportation complexity is greatly reduced; you won't have a situation where a unit gets 200 pounds of vegetables but no meat, eggs, or milk. That mistake won't happen. Just count the cans. Throughout WWII, at least 70 million kilograms, about 140 million cans, of Spam were shipped to the front lines, allowing American GIs to eat their fill. That's how Americans won WWII._
Having said all this, what is the essence of Spam? It's not just meat in a can; it's essentially encapsulating methods from animal husbandry, food processing, food chemistry, transportation, and other fields—a vast cognitive system—into a can, greatly reducing complexity.
What I want to say is that the core of this transformation is the same concept as Luo Pang's cognitive folding: In the past, brand owners' distribution networks were super complex supply chain systems. For product agency, every distributor needed a warehouse, inventory management, financial management, warehouse managers, and even salespeople and vehicles. These massive backend tasks consumed a lot of distributor energy for management, but they don't create value.
**If through three-network integrated coordination, bus-style logistics, and third-party trusteeship, it's equivalent to folding this super complex supply chain into a box, folding inventory management, warehouses, warehouse managers, vehicles, etc., all to the backend, into a super large-scale supply chain network. At this point, distributors only need to do one thing: focus on marketing work, do sales well, and do the most value-creating thing.**
For distributors, besides marketing and transactions, everything is cost. For brands, folding this complex thing into a super large supply chain network also makes management very efficient.
Moreover, this folding is not only in the supply chain; an important tool for achieving three-network coordination is the middle platform system. In "Shao Heng's Headlines" on "Dedao," there is an article that clearly explains the middle platform:
 _The middle platform was first proposed by Alibaba. In mid-2015, Jack Ma visited a Finnish game company called Supercell. You might not be familiar with the name, but you may have played their games, like Clash of Clans. This company makes $1.5 billion in profit a year, but has very few employees—less than 200—and each game development team has only six or seven people._
 _How did such a small team build such a big business? One reason is that they organized common game assets and algorithms used in game development and provided them as tools to all small teams. The same set of tools can support several small teams developing games. This management method is a "middle platform" model._
 _**A middle platform is a mechanism that can simultaneously support multiple businesses, allowing information to interact and enhance between businesses.**_
 _Jack Ma was very inspired after visiting Supercell and soon established the middle platform strategy at Alibaba. Alibaba has a data middle platform team. Its main role is to standardize the way data is defined, calculated, and stored across different departments, and put this data on a unified platform._
_This way, a large platform tracks all data changes, and data from one business can guide other businesses. Alibaba had actually been doing this for a long time, but it was only at the end of 2015 that they organized it into a clear middle platform strategy._
 _When Ele.me was acquired by Alibaba, the first thing was to connect to Alibaba's data middle platform._
 _When Ele.me does ground promotion, it needs to know which merchants are open. Alipay has such data. If a transaction is completed on Alipay, doesn't that indicate the merchant is open?_
 _Alipay provides Ele.me with store name, location, and whether it's open, and Ele.me also provides its own data to Alipay. The two sides compare data and fill in missing information. This is a case of using the middle platform._
 _Why are major internet companies starting to build middle platforms now? Because as their businesses grow and become more complex, there are many overlapping links in business management and functions. If these links are developed independently, it would be very wasteful._
 _For example, Taobao, Tmall, and 1688, although their merchants and customers differ, all involve basic systems like product information, orders, inventory, warehousing, and logistics. Rather than each business having an independent system, it's better to use a unified platform to complete these basic processes. Modularize the common links._
 _Another example: Toutiao has many different types of products, but the core steps for all product growth are the same: acquisition, retention, and monetization. For these links, Toutiao has built middle platforms. User growth has a middle platform, and commercialization also has a middle platform._
 _Liang Ning reminds us to notice a detail: products like Douyin with hundreds of millions of users have product teams of only about 400 people. Such a small team couldn't run a product of this scale without a strong middle platform. Then look at Toutiao's middle platform: 10,000 people._
**Therefore, on one hand, the middle platform system avoids duplicate work and reduces waste; on the other hand, it can empower multiple products simultaneously.**
You must have thought that with such a middle platform system, the organizational structure and management model of large companies will undergo huge changes. Liang Ning believes one change is that the company's decision-making layer gains the ability to penetrate data, no longer limited by company hierarchy.
The middle platform idea originated from military reform, that is, the middle platform's navy plus the front-end special forces or mixed combat groups. Alibaba's big middle platform and small front-end can be compared to the US Marine Corps and Navy SEALs. Each frontline special forces team is small, emphasizing collaboration and flow. They can call on middle platform data and weapons to support their operations, keeping decision-making and brains at the front line, with strike capability integrated in the rear.
The first Chinese entrepreneur to introduce this idea was not Jack Ma, but Ren Zhengfei. This group army plus special forces approach played an important role in Huawei's rapid expansion.
In plain terms, it's like for screwing screws, worker A made a Phillips screwdriver, worker B made a flathead screwdriver, the boss thought the whole factory could use them, so he made a toolbox to store them, and then workers C, D, E, F could use them as needed. So, the middle platform is about building modules that can be shared by the front end. It can be data, architecture, thinking, or even marketing tactics, and can be built between enterprises, departments, people, and things.
The transformation the author talks about **is essentially folding the common parts of market, marketing, and supply chain departments into a super large middle platform system. Then, small teams operating various fragmented channels at the front end, when they need data or products, only need to send requests to the middle platform and call resources.**
The technology to fold the supply chain system and build a middle platform has existed for ten years. The difficulty is not the technology itself; the core is still the concept. Whether companies do it or not depends on the innovator's dilemma caused by their existing stock, and on being kidnapped by external value networks. But the future is already here. No company can last forever, but to adapt to this era, organizational change is inevitable!
References:
"What is Cognitive Folding" by Luo Zhenyu
"Why Internet Companies Are Building Middle Platforms" by Shao Heng


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