From March 14-16, 2024, the 9th China FMCG Innovation Conference, the 2nd China FMCG Hard Discount Conference, and the 2nd China FMCG Distributor Conference were grandly held in Chengdu! At the 2nd Distributor Conference, Li Wenjun, partner of New Distribution Research and Consulting, provided an in-depth interpretation of the "2023 China FMCG Distributor Warehouse and Distribution Logistics Survey Report." This report, which took three months to compile, is a joint industry-exclusive study by New Distribution and Best Supply Chain, and serves as the essence of the "2023 China FMCG Distributor Warehouse and Distribution Logistics Cost Reduction and Efficiency Improvement White Paper." It surveyed and studied 282 medium- and large-scale FMCG distributors in mainland China, primarily dealing in different categories. Spanning 14 categories, including water and beverages, convenience foods, leisure snacks, rice, flour and oil, condiments, milk and dairy, personal care and daily chemicals, paper and hygiene products, baijiu, beer, other alcoholic beverages, baby products, and frozen foods, it provides a detailed analysis of the current state of warehouse and distribution logistics among Chinese FMCG distributors, revealing cost indicators and directions for cost reduction and efficiency improvement, offering frontline first-hand information and references for distributors' future business development.
Warehouse Overview First, let's look at the warehouse overview of distributors (ownership and self-operated warehouse area). The survey found that distributors primarily rent ordinary warehouses, accounting for 51.1%. In higher-tier cities, warehouse outsourcing and professional warehouse adoption rates are higher. In terms of self-operated warehouse area, 1000-5000 m2 is the mainstream, accounting for 57.9%. First-tier cities have the highest rate of large warehouses, with warehouses over 10,000 m2 accounting for 26.9%.
Warehouse Storage Mode Flat warehouses are the mainstream, accounting for 68.4%. Three-dimensional warehouses account for 31.6%. Among warehouses over 10,000 m2, the three-dimensional rate is the highest, reaching 78.3%. As warehouse area increases, the adoption rate of three-dimensional warehouses rises. By category, distributors of snacks and convenience foods have the highest degree of warehouse three-dimensionalization compared to other categories, exceeding 36%.
Warehouse Capacity 16.2% of distributors believe warehouse capacity is insufficient, with this proportion increasing with sales scale. Additionally, 44% of distributors believe warehouse capacity is just right, while 39.8% believe it is insufficient. Meanwhile, distributors using warehouse, picking, and distribution management software are better able to meet warehouse needs.
Distribution Mode In terms of distribution modes, we divide them into three types:
- Self-operated distribution: Distributors own the vehicles and employ drivers.
- Distribution contracting: Distributors manage vehicles and drivers.
- Outsourced distribution: Both vehicles and drivers are managed by third parties. The survey results show that self-operated distribution is the mainstream, accounting for 72.3%, especially among distributors in lower-tier cities, where the self-operated distribution rate reaches 89.3%. Additionally, distribution contracting accounts for 22.7% overall, and outsourced distribution accounts for 23.1%.
Inventory Management Distributors' warehouse management measures include batch management, return management, and zone management. Among these, 77.7% of distributors have implemented batch management. Management in lower-tier cities and small-scale distributors is relatively weak; batch management is common, but return management needs strengthening.
Inventory Turnover Among the surveyed distributors, the average turnover days are about one month. Snacks and dairy products turn over the fastest, at less than 25 days, while paper and hygiene products and personal care and daily chemicals turn over the slowest, at 46.8 days.
Compensation Mechanism Regarding compensation and benefits for warehouse, picking, and distribution personnel, warehouse and picking staff mainly receive fixed wages, while distribution personnel more commonly receive commission-based pay. Small-scale distributors (with revenue below 10 million yuan) mostly adopt fixed wage systems. Digital sales and warehouse, picking, and distribution software help enhance the effectiveness of compensation and benefit mechanisms.
Warehouse, Picking, and Distribution Management Software 57.4% of distributors use related warehouse, picking, and distribution management software. Among them, higher-tier cities and large distributors with revenue over 100 million yuan have higher adoption rates. 53.2% of brand owners require their distributors to integrate order and warehouse data.
Warehouse and Distribution Logistics Cost Ratio Based on the survey of 282 target distributors, by category, baijiu has the lowest warehouse, picking, and distribution cost ratio at 1.7%; bulky paper and hygiene products have the highest ratio at 5%. Distributors should comprehensively consider multiple factors, optimize product structure, implement refined inventory management and order planning, optimize distribution networks and routes, and introduce advanced logistics management systems and automation equipment to reduce logistics costs. Regarding changes in the warehouse and distribution logistics cost ratio, from 2023 compared to 2022, 42.9% of distributors saw an increase in the cost ratio, with lower-tier cities being more significant. Among them, the logistics cost percentage for rice, flour, and oil, condiments, and personal care and daily chemicals increased notably. Regarding the reasons for the increase in the warehouse, picking, and distribution cost ratio, increased labor costs are the primary reason. However, higher-tier cities are most affected by revenue decline. Regarding the reasons for the decrease in the warehouse, picking, and distribution cost ratio, increased operating revenue, optimized warehouse layout, and improved compensation and benefit mechanisms are key to reducing the ratio.
Warehouse and Distribution Logistics Challenges Regarding the main problems distributors encounter in warehouse, picking, and distribution processes, difficulty in managing goods and warehouses, high distribution costs, and low picking efficiency are the biggest challenges, especially in lower-tier cities. Regarding directions for cost reduction and efficiency improvement in warehouse and distribution logistics, distributors generally believe that inventory management improvement, warehouse layout optimization, and operational efficiency enhancement are the three core directions. Additionally, first-tier city distributors pay more attention to optimizing compensation and benefit mechanisms, while second-tier and below cities focus more on the rationality of transportation arrangements.
Based on the above survey results, this report proposes four major construction directions for cost reduction and efficiency improvement in distributor warehouse and distribution operations:
1. Basic Stage—Optimize Management Information management, inventory management, distribution management, picking management, warehouse management
2. Consolidation Stage—Improve Human Efficiency Process formulation, professional division of labor, staffing, compensation and performance
3. Expansion Stage—Share Resources Warehouse and distribution outsourcing, centralized warehousing and joint distribution
4. Innovation Stage—Model Upgrade B2B platformization, warehouse and distribution logistics platformization
The report elaborates on the paths, elements, and precautions for cost reduction and efficiency improvement in distributor warehouse and distribution logistics, and includes practical cases for reference. The transformation path is full of challenges. FMCG distributors aspiring to grow stronger should keenly observe the future trends of warehouse and distribution logistics and use this as an opportunity to drive their own transformation and upgrading, achieving leapfrog growth!
This grand blueprint for development is dedicated to every brave soul in this ever-changing world. We sincerely hope that every hero can deeply explore and forge their own core competitiveness, build a unique supply chain ecosystem, actively embrace digital upgrading, courageously achieve platform transformation, and ultimately achieve leapfrog growth and takeoff!
The above is part of the report content. For more details, please refer to the full report.
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