Amid China's economic slowdown, fragmented consumer demand, e-commerce impact, and squeeze competition, the traditional channel model in FMCG is under pressure, with sales hitting bottlenecks. Against this backdrop, New Distribution, in collaboration with Professor Gao Song from the Business School of East China University of Science and Technology, launches the 'Gao Song: Channel Empowerment' column to explore new channel models, strategies, and methods for FMCG manufacturers and distributors in the new era. Manufacturers and distributors are like a loving and fighting couple, sharing common interests yet conflicting, leading to inefficiency and high costs in the traditional channel value chain. To bypass distributors and resolve this contradiction, many leading manufacturers replace distributors' promotional functions by building their own teams to serve terminals, achieving channel refinement and penetration. The result is declining per-capita efficiency and soaring sales costs. Brand owners should shift their mindset, confront the manufacturer-distributor contradiction, and find solutions to motivate distributors and improve channel efficiency. Clearly, such transformation requires support from Brand X. Soon, the 'Distributor Excellence Management' project, planned by Brand X's marketing director Lao Cao and Professor Li, was launched. Distributors Lao Zhang and Xiao Zhang signed up together for this training program. **-01-**Taking Distributor Profitability as the Basic Goal Before the training, both sensed its difference from previous sessions. First, the training aims to help distributors improve business quality, i.e., help them make money, unlike past trainings that focused on manufacturer tasks, marketing requirements, and product knowledge. Second, practical implementation requirements. The training requires on-site learning, on-site plan development, followed by 6-8 months of practical implementation to achieve tangible performance improvement. Third, establishment of joint teams. Participants include not only distributors but also Brand X's city managers. Each distributor and their corresponding city manager form a joint team, sharing project tasks and achieving performance. Distributors Lao Zhang and Xiao Zhang immediately felt the thoughtful design of the project. In the past, Lao Zhang had complaints about Xiao Fang, the city manager responsible for their area. Every time Xiao Fang visited, it was either to push inventory or chase payments, offering little help to Lao Zhang's actual business. Of course, Lao Zhang understood that Xiao Fang had KPIs to meet, on which his bonuses and promotions depended. But as the saying goes, 'Work hard on the cause, and let the results follow.' In the past, they worked hard on results but let the cause drift—how could good results come? If City Manager Xiao Fang's assessment could be linked to Distributor Lao Zhang's performance improvement, then they would be comrades in the same trench, with hearts together and efforts together. By studying the market seriously and implementing actions accordingly, how could performance not improve? **-02-**Translating Manufacturer KPIs into Distributor Business Quality Improvement Indicators Distributors Lao Zhang and Xiao Zhang arrived at the training venue with anticipation, joining over 50 distributors and city managers for a four-day, three-night learning journey. The first day covered distributor business diagnosis and business strategy. Since the goal is to improve distributor business quality, how to measure and analyze distributor business? This requires establishing a distributor health check indicator system. The core of this system uses the DuPont Analysis as the financial analysis model, targeting distributor return on investment, and extracts 23 core operational indicators based on specific distributor scenarios. Lao Zhang had never heard of these indicators; his accounting was rough, just checking if money increased at year-end. Fortunately, Xiao Zhang, with an MBA background, quickly mastered this financial indicator system, treating it as a treasure. Xiao Zhang understood this as a comprehensive data map for distributor operations; following it could continuously improve operations and increase ROI. The main indicators focus on improving distributor business quality and are divided into three categories: increasing revenue, reducing costs, and enhancing efficiency. 1. Increasing Revenue: Revenue growth rate, high-margin product ratio, terminal activity, etc., measure the distributor's ability to generate income. Xiao Zhang compared his operational indicators with reference values and immediately identified problems. First, sales growth rate was low, only single-digit growth. A key reason was insufficient terminal activity, indicating the sales team's visits and service quality to terminals were inadequate, hindering sell-through. Second, high-margin product ratio was low, only 10%. High-margin products are mostly new products, indicating Lao Zhang had not proactively upgraded products, leading to low overall gross margin and insufficient profitability. 2. Reducing Costs: Cost reduction indicators mainly include sales per square meter, vehicle efficiency, personnel efficiency, bad debt rate, and product loss rate, measuring the distributor's ability to save costs and expenses. When Xiao Zhang tested his indicators, he was surprised to find huge management loopholes in Lao Zhang's business. First, sales per square meter was low, only 1 ton/month/square meter, mainly because the warehouse was over 2,000 square meters with insufficient actual usage, causing waste. Second, product loss rate was as high as 1%. Lao Zhang deals in standard packaged products, where loss should be low; the reference value is below 0.3%. There must be something suspicious; Lao Zhang's warehouse management is chaotic, possibly with internal theft. 3. Enhancing Efficiency: Efficiency indicators mainly include inventory turnover and accounts receivable turnover, measuring the speed of asset turnover. Many distributors initially didn't understand this indicator, but Xiao Zhang, with financial knowledge, helped explain. Asset turnover is extremely important; for trading companies, gross margins are generally low, so competition is on asset turnover speed. At the same gross margin level, faster turnover means higher ROI. Xiao Zhang's test showed his asset turnover was also below reference, mainly due to two reasons: First, low inventory turnover, only 10 times/year, mainly because City Manager Xiao Fang often pushed inventory, leading to stale and slow-moving goods. Second, low accounts receivable turnover, only 12 times/year, mainly due to poor collection efforts; sales staff focused on distribution but not on payment collection, leaving large amounts of receivables outstanding, reducing turnover and posing bad debt risks. **-03-**The Fundamental Interests of Manufacturers and Distributors Are Aligned After the comprehensive health check, Distributor Lao Zhang broke into a cold sweat, realizing that after a lifetime in business, he had so many management problems. He increasingly appreciated his decision to let his son take over. Under the teacher's guidance, based on the financial health check results, Distributors Lao Zhang, Xiao Zhang, and City Manager Xiao Fang jointly planned major improvement measures for the second half of the year.

  1. Increase terminal activity to boost sales growth. 2. Upgrade products to increase high-margin product ratio. 3. Reduce warehouse space to improve sales per square meter. 4. Strengthen warehouse management to reduce product loss rate. 5. Strengthen accounts receivable management to increase turnover. 6. Avoid inventory pushing, reduce average inventory while ensuring terminal order response rate. Identifying the real problems means half the solution is already achieved. After this check, Distributors Lao Zhang and Xiao Zhang discovered their problems and felt confident, actively engaging in subsequent learning. Sales Director Lao Cao observed this with joy. In fact, the indicators for improving distributor business quality are a translation of the manufacturer's KPIs, fully reflecting the manufacturer's interests. Revenue-increasing indicators like sales growth rate and high-margin new product ratio are exactly the manufacturer's core indicators. In the past, manufacturers pushed inventory based on their own needs, causing distributor backlash; but from the perspective of improving distributor business quality, distributors are willing to accept and cooperate. Although cost reduction and efficiency indicators are not directly related to marketing results, improving personnel efficiency, reducing costs, enhancing terminal service efficiency, and building an operationally efficient, financially healthy, and vibrant organization are of great significance for the manufacturer's long-term development in the local market. Over the next two days, Lao Zhang and Xiao Zhang learned how to improve their business, with methods including operational details and specific cases. In the evenings, Lao Zhang, Xiao Zhang, and Xiao Fang worked overtime to develop their own plans. **-04-**Resource Allocation Based on the Principle of Racing Horses, Not Judging Horses Distributors Lao Zhang and Xiao Zhang were very confident in their plans, willing to invest their own funds in marketing and additional sales staff, while also applying for company marketing resources and service support. The final day was the project review session, attended by Sales Director Lao Cao, Professor Li, and other marketing executives and experts. The review criteria included goal reasonableness, diagnostic accuracy, strategic innovation, plan feasibility, and distributor proactiveness (assessed by their own resource investment). Based on these criteria, review experts listened carefully to presentations, asked questions, heard defenses from distributors and city managers, and finally scored. 80% of distributors passed the defense, while 20% had their plans returned for revision. Lao Zhang and Xiao Zhang's plan scored high, earning corresponding marketing resource support from the company, making the father-son duo very happy. Sales Director Lao Cao was also pleased. Previously, the company allocated marketing resources based on sales proportion, which became distributor profit subsidies and wasn't truly invested in marketing activities like shelf displays and experience promotions. The current approach is based on the principle of racing horses, not judging horses, matching resources according to distributors' actual plans and their own investment, and deciding future resource allocation policies based on results. Clearly, this is more precise and efficient. The training concluded with a signing ceremony, where Distributors Lao Zhang and Xiao Zhang went on stage together with Sales Director Lao Cao and City Manager Xiao Fang to sign a performance improvement pledge.