01 The Trend of the Omnichannel Era and the 'Left-Right Dilemma' Where are orders? With customers. Where are customers? Online, offline, in any time or space that crosses the virtual and real worlds. Today, customers may place orders at any time in 24 hours, through any virtual or physical channel. The sum of these channels, large or small, traditional or emerging, is omnichannel. Some call it 'all-domain,' but it means the same. 1) Omnichannel is a trend of the times, not a phase. In the digital world, marketing inevitably enters the 'omnichannel era.' Indeed, in recent years, the main increments in FMCG have come from two areas: first, emerging channels like livestreaming and group buying; second, traditional channels upgraded with digitalization like O2O. Meanwhile, the natural growth of all traditional terminals has almost disappeared. In recent years, any brand that has grown well has stabilized its traditional channel base while capturing increments from new channels. The omnichannel era is a clear trend, by no means a temporary phenomenon. History does not reverse; customer consumption behavior will become increasingly spontaneous and cannot return to the past. It is safe to assert that brands not adept at omnichannel should not expect sustained growth. 2) Two major challenges in sales and supply chain make omnichannel operations a 'left-right dilemma.' Omnichannel is an easy concept to understand, but easier said than done. Most FMCG brands are still exploring omnichannel, and no mature model has been summarized yet. We believe omnichannel faces two major challenges: first, how to excel in omnichannel sales operations? Second, how to excel in omnichannel delivery services? That is, how to build supply chain capabilities suited to the omnichannel era. Let's address the first challenge. Do not assume omnichannel sales are easy; in fact, they are very difficult, especially for brands with a huge offline base. Stabilizing the offline base while capturing new increments is easier said than done, as difficult as the Shu Road. How to handle price conflicts between online and offline? Online, without breaking price, there is no sales; breaking price disrupts offline. Should B2b be done? How to do O2O? What about online channel flooding offline? These problems have solutions, such as Tsingtao Brewery using new products online to achieve both volume and profit. But that is not the focus of this article, so we will not expand here. For omnichannel sales, especially involving online and online-offline integration, most brands currently face issues of mindset, methods, strategies, and talent. Now the second challenge: how to deliver goods to customers who place omnichannel orders. Omnichannel order types are very complex: large and small orders, online and offline, B2B and B2C, normal and exceptional, daily and hot-selling... How to stock inventory for these orders? How to meet different channels' order operation needs, delivery time and requirements, and product shelf-life needs? Do not underestimate these issues. FMCG products are low-value, high-volume, bulky, heavy, and low-margin. Why do many brands fail at omnichannel operations? Often, the problem is not sales but supply chain. For example, a livestream generates 100,000 orders, but inventory errors cause a week of delayed shipments; For example, no regional warehouse division, so when the pandemic hits, the entire warehouse-to-logistics system collapses; For example, B2B and B2C inventory are not integrated, leading to high stock in some areas and frequent stockouts in others, with significantly low inventory turnover... These are just the tip of the iceberg of supply chain issues; actual omnichannel supply chain problems are far more complex. Currently, most FMCG enterprises lack awareness of omnichannel supply chain issues, let alone mature solutions. Thus, many FMCG companies either fail to grow omnichannel sales, or if sales grow, fulfillment is a mess, even losing money on each order. This 'left-right dilemma' is the current state of omnichannel operations for many enterprises. Competition in the omnichannel era is not just marketing competition but also competition in the efficiency of resource allocation and supply chain capabilities. Now we can conclude: enterprises that cannot solve omnichannel supply chain capabilities cannot win sustained victories in the omnichannel era. This is the focus of this article.
02 What Kind of Supply Chain Should FMCG Brands Build in the Omnichannel Era? 1) First, it must be safe, stable, and reliable. The environment we face today is highly uncertain. Customer behavior is uncertain, market sales are uncertain. If we cannot build a 'certain' supply chain, we cannot seize most fleeting opportunities. Especially with the pandemic becoming normal, if your supply chain design cannot remain stable under most uncertainties, your omnichannel competition is basically empty talk. 2) Second, it must simultaneously meet the requirements of fast, good, and cost-effective. Fast is the basic condition of today's supply chain. A slow supply chain cannot meet B2B and B2C customer expectations and will lose many valuable sales opportunities. Good: Whether for B-end clients or C-end customers, good supply chain service is an inseparable part of the product. Without a good supply chain, poor service experience beyond the product weakens competitiveness and leads to loss of hard-won repeat customers. Cost-effective: A supply chain with sufficient cost competitiveness is the foundation and prerequisite for profitable omnichannel operations. All services and experiences that ignore cost are unsustainable. The problem is that meeting fast and good supply chain services often comes at high cost, which is the core reason for losses on many omnichannel orders. The reason for high costs is that these supply chain service providers have not achieved effective integration across the entire chain, nor designed supply chain models that reduce logistics links and improve distribution efficiency. After reviewing most supply chain models in the market, we can draw a basic conclusion: supply chain models not designed from a holistic, brand-business perspective are basically unable to compete on cost with traditional trading company logistics. Looking from the future to today, sales channel differentiation will become increasingly severe. Building supply chain capabilities suited to the omnichannel era has become one of the core competitive capabilities in this era. 3) Third, it must be smart and flexible enough to feed back and empower omnichannel business growth. Being smart is the key to saving costs in the supply chain. Traditional distributor logistics has no room for cost reduction because it cannot become smarter. A fixed business volume matches a corresponding warehouse area, labor, drivers, etc. Distributors have optimized both necessary and unnecessary costs to the extreme, leaving almost nothing to save. Since 2016, 'New Distribution' has clearly proposed the direction and trend of 'professionalization of FMCG logistics supply chain.' The traditional 'small but complete' model of FMCG distributors is isolated, inefficient, and unprofessional. The FMCG supply chain must transform and upgrade toward professionalization and third-party services. Currently, we are in the midst of this transformation and upgrade. Only third-party supply chain services focus on logistics supply chain, with their only product being their supply chain service. Only through third-party services can upstream and downstream be connected, and systems can make them smart enough. Being flexible enough to accommodate the diverse order fulfillment needs within omnichannel. Almost no traditional supply chain can handle omnichannel supply chain services because they lack flexibility. Excellent third-party supply chains can achieve this. Each type of order may correspond to a specific warehouse operation requirement and a specific delivery requirement. Traditional logistics supply chain models are people-centric with systems as support, providing only simple and clear operations. When faced with complex and trivial omnichannel order fulfillment needs, they are helpless. Excellent third-party providers are system-centric with people as support. With upstream manufacturers, platforms and channels, downstream terminals and customers connected, the system can be smart enough to give the clearest and most correct operation instructions. This is unimaginable in traditional models. Even, when the system is smart enough, it can use historical data and omnichannel dynamics to feed back and empower omnichannel business. It can tell you how much inventory to stock; it can transfer slow-moving inventory to more suitable regions, etc. In 2022, 'New Distribution' visited and surveyed hundreds of FMCG brand enterprises, concluding: The more leading the brand, the more it values omnichannel development and the more it emphasizes building omnichannel supply chain service capabilities in partnership with excellent third-party supply chain service providers.
03 FMCG Distributors Cannot Stand Apart from the FMCG Supply Chain Revolution Without distributor participation, the brand's supply chain transformation is fragmented and incomplete; if distributors do not participate or integrate into the brand's supply chain transformation, they cannot enjoy the dividends of the transformation nor adapt to omnichannel competition. Why do brand supply chain transformations need distributor participation? The essence of this round of supply chain transformation is to respond to the competitive characteristics and order demands of the omnichannel era, reconstructing the entire chain service from 'factory to channel to terminal to consumer.' If distributors do not participate, the brand's full-chain product data cannot be truly connected, making it impossible to shorten logistics links, reduce omnichannel inventory, improve omnichannel turnover, and limit cost reduction and efficiency gains. If they do not participate or integrate, the transformation dividends are irrelevant to distributors. Distributors alone can hardly handle omnichannel supply chain services and can only watch the era pass by. Therefore, distributors should see that the essence of the omnichannel era is professionalization and ecosystemization. Every company in the industry chain must integrate into an ecosystem to survive and develop; going solo is dying out. Every role in the ecosystem must continuously professionalize to have survival and development value. What is the essence of a distributor? It is the promoter and operator of regional markets. Through many channel transformations, it is distributors with regional promotion and operation capabilities that survive and grow. In the past, professional social supply chain capabilities could not meet market service needs, so distributors had to build their own logistics. But today, supply chain transformations initiated by brands and widely participated by third-party supply chains can already provide mature, fast, good, and cost-effective supply chain services to FMCG manufacturers in many markets. By partnering with professional and reliable third-party supply chain platforms, distributors can not only make their supply chain services safer, avoiding warehouse and logistics instability due to urban management, pandemic safety, etc., but also save logistics costs, share inventory to reduce stock, and share data to enhance business. As mentioned, the omnichannel era is a brand-new era. In this era, distributors have new missions, tasks, and values. Only by focusing on their core missions and tasks in the new era, actively embracing and integrating into the new omnichannel ecosystem, and finding their ecological niche, can FMCG distributors win the future.
04 The Unique Annto Model: An Omnichannel Partner for FMCG Supply Chain Transformation In the omnichannel era, many excellent FMCG brands and distributors have attached unprecedented importance to supply chain capabilities. Many excellent enterprises have made significant changes in supply chain organization and talent in recent years. For example, the original logistics department has been upgraded to a 'Supply Chain Center'; the core work of the original logistics department was coordinating warehousing and logistics, but now the 'Supply Chain Center' covers procurement, production logistics, sales logistics, etc.; the original logistics department mainly did work in-house, but now it collaborates extensively with professional third parties. Global Fortune 500 companies treat supply chain as part of corporate strategy, and generally globally operating companies have a Vice President of Supply Chain. For example, Tony, Senior Vice President of Supply Chain and Procurement for Nestlé Greater China, is responsible for supply chain and procurement planning and management; Lü Hanbin, Vice President of Supply Chain for Danone (China) Food & Beverage Co., Ltd., is responsible for Danone Beverage China supply chain business; and on June 21, 2022, Jiang Zongxiang, the new President of Tsingtao Brewery, took office. He previously served as President of Supply Chain at Tsingtao Brewery. That a supply chain executive can rise to the presidency proves that the era of supply chain as a core FMCG capability has begun. From Midea Group's perspective, it has established a dedicated supply chain operating company, Annto Intelligence, and treats it as an important member of Midea's digital innovation business segment, providing end-to-end supply chain solutions to society. Public information shows that Annto Intelligence President Liang Pengfei serves as a global partner of Midea Group. Annto Intelligence provides supply chain services to thousands of FMCG enterprises, including well-known brands such as Nestlé, Yihai Kerry, Danone, Master Kong, Nongfu Spring, China Resources, Luhua, Uni-President, and Want Want. Why do these leading FMCG companies choose Annto Intelligence? What kind of unique supply chain enterprise is Annto Intelligence? 1) Annto Intelligence is a supply chain enterprise with a unique background and the best understanding of the client side. Annto Intelligence is currently the only supply chain enterprise originating from the client side, inherently carrying client genes and best understanding client business needs and core concerns. Annto Intelligence's predecessor was the logistics company under Midea Group, responsible for Midea's nationwide product logistics. During this period, Annto Intelligence completed the transformation of Midea's nationwide supply chain model: unifying nationwide distributor inventory, separating orders and logistics, saving logistics costs and over 80% of warehouse space. Therefore, it can be said that Annto Intelligence is a supply chain enterprise born and grown from a brand enterprise, with successful supply chain model transformation experience. It is unique, unlike any other supply chain service company in the market. 2) Annto Intelligence provides a unique '1+3' integrated supply chain service. The '1' refers to 'full chain.' Annto Intelligence's services cover from 'raw materials' to 'factory' to 'finished products,' and after 'finished products come off the line,' unified warehousing and distribution to the smallest distribution terminal anywhere in the country, including direct-to-consumer (2C). Annto Intelligence's full-chain integrated supply chain service, covering FMCG from upstream production to the most downstream sales, is almost unmatched in the industry. The '3' refers to Annto's three core services: 'One Inventory,' 'Delivery and Installation Integration,' and 'Production Logistics.' Let's focus on One Inventory. Annto's 'One Inventory' is not simply understood as 'one inventory,' but as 'bC integration' under the omnichannel context. How to understand this? The order characteristics of the omnichannel era are trivial and complex, leading to extreme fulfillment difficulty and high fulfillment costs, putting FMCG enterprises, which are extremely sensitive to warehousing and distribution costs, in a dilemma of difficult revenue growth and even more difficult profit growth. Annto's One Inventory model first integrates full-chain and omnichannel inventory sharing, reducing warehousing costs and inventory levels. At the same time, omnichannel inventory integration significantly reduces the number of handling times, directly improving response speed and saving costs. Second, Annto's One Inventory also achieves bC integration in order fulfillment. With omnichannel inventory integration, omnichannel order delivery also achieves bC integration. Currently, C-end orders mainly go through express delivery, with the highest per-unit cost, while B-end orders have the lowest per-unit cost. Annto's bC integration achieves C-end express efficiency and experience at a cost close to B-end orders. Undoubtedly, for FMCG enterprises that are low-value, high-volume, and extremely sensitive to logistics costs, Annto's bC-integrated 'One Inventory' model is a powerful tool for omnichannel operations. We can see that Annto, through its unique company background and genes, and unique service system, has built a 'full-chain' supply chain service model different from other third-party supply chain enterprises. In this model, distributors are not excluded but organically designed into the brand's supply chain system. After the distributor's supply chain is grafted into the brand's supply chain system, inventory goods are fully shared, storage costs drop significantly, and circulation speed greatly improves. At the same time, Annto's omnichannel service system allows distributors to confidently expand omnichannel business increments. Third, Annto's full-chain and omnichannel data capabilities can feed back to distributor business, filling the distributor's weakest data capability. Annto Intelligence provides a free system for brand distributors for inventory management, and has connected information flow between store ends and logistics systems; the front end can also connect to brand systems, enabling distributor purchase orders and inventory data visualization synchronized to the brand, achieving channel digitalization. The omnichannel era is a brand-new era, an era of professionalism and focus, an era of data intelligence. Today, most manufacturers indeed face new challenges. Our past successful experiences still have irreplaceable value, but we need to rethink, refine, and choose them from the perspective of the omnichannel era.