As the year draws to a close, "restarting 2020" has become a topic of discussion for many. Looking back on the past year, the impact of the pandemic on everyone's work and life needs no elaboration. For many, 2020 has become an unforgettable year for the next five, ten, or even longer.

If time could flow backward, and we could reset the pendulum to the beginning of 2020, setting aside the pandemic's impact on our work and life, would our industries and businesses truly be better off than they are now?

-01- Changes in the Macro Environment Increase Business Uncertainty!

Although time cannot be reversed, overall, the market environment is continuously progressing and iterating toward greater fragmentation, diversity, and segmentation. These labels—fragmentation, diversity, and segmentation—I believe bring uncertainty to every practitioner's business.

Before answering why we make this assertion, let's first look at why FMCG manufacturers' businesses were so easy before, and why so many billion-yuan products and brands emerged.

In the past, when the water was big, the fish were big. The rapidly growing population nurtured the world's most vibrant consumer market. The strong consumer demand brought by the huge population base, coupled with severe supply-demand imbalance, meant that both brand manufacturers and distributors held considerable bargaining power in the entire FMCG supply chain.

Second, centralized media greatly promoted brand communication and the establishment of giants. In the past, people had very limited ways to access information. FMCG companies could only conduct brand promotion and communication through e-commerce, newspapers, and magazines. Whoever controlled the prime advertising slots in mass media controlled the market sales for that year.

Third, channels were single. In the past, FMCG sales channels were single, and consumers had only a few ways to purchase goods: circulation channels, KA channels, special channels, and "mom-and-pop stores." All FMCG manufacturers pursued maximum product display at retail terminals.

Image source: New Distribution

Now, everything has changed! First, population growth has slowed and society is gradually aging, which is the biggest external factor constraining FMCG industry growth. Second, economic development has brought about a high degree of social division of labor. Production, marketing, and channels have been separated from the original multi-functional mixed organizations into single-function organizations that are both synergistic and isolated from each other. At the same time, internet-famous new products are constantly emerging, competition between enterprises is intensifying, and the FMCG market has entered a stage of stock competition.

Image source: Log Research Institute

In addition, the development of mobile internet has diversified the ways people access information. Single channels have evolved into a structure dominated by traditional and modern channels, with B2B, social e-commerce, O2O, short-video live-streaming e-commerce, special-channel e-commerce, and other multi-channel coexistence. In terms of delivery, transactions and delivery are gradually separating, and the past linear commercial and logistics networks are increasingly showing a grid-like trend.

-02- Finding Increment in Stock: Ann's "One Pallet of Goods" for FMCG Helps Supply Chain Transformation and Upgrading

But does this mean that in the new market environment, the businesses of brand owners and distributors cannot improve? The answer is clearly no. Although an elephant turns slowly, once it decides to turn and starts moving, the energy it unleashes is far greater than that of its peers.

On December 19, Anneng Zhilian, together with Tsingtao Brewery, jointly with Zhilian Shunda, Log Research, Meiyun Zhishu, Swisslog, China Merchants Bank, Minsheng Bank, DBS Bank, and Nestlé Youhuo, successfully held the 2021 FMCG Industry Supply Chain Transformation Enterprise Annual Meeting in Zhengzhou with the theme "Win-Win Cooperation, Value Co-Creation." More than 200 enterprise representatives attended, including Want Want, Uni-President, Hsu Fu Chi, Danone, Mengniu, Liby, Feihe, Qiaqia, Wahaha, Luhua, Nongfu Spring, Baixiang, Jinmailang, Jianlibao, Hengan, Proya, Sinopec, Gujing Gong, and Shuanghui.

At the meeting, Liang Pengfei, President of Anneng Zhilian, stated, "In the current highly uncertain environment, what we can do is to do the certain things well. Perhaps this certain thing is to return to the most basic essence of business, or perhaps to return to technical management, or perhaps to return to what we can do and do it well."

"From the perspective of today's theme, from the supply chain dimension, efficiency, cost, and experience are three elements that will never change. Or, when we take products off the production line, whether we can deliver them to the consumption scenario at the fastest speed, with the shortest chain, and the least loss may be the direction we should strive for."

Returning to the FMCG industry, "the fastest speed, the shortest chain, and the least loss" means that brand owners and distributors, when facing different consumption scenarios and distribution channels, must synchronize inventory in real time, be highly efficient and agile, fulfill orders quickly, and deliver in a standardized manner.

In the past, inventory data among brand owners, distributors, and retailers were isolated and could not be effectively coordinated. This led to products being heavily backlogged in channels, making it difficult for brand owners to effectively predict sales and arrange production; distributors faced stockouts during peak seasons with long waiting times, while during off-seasons, warehouses were overstocked, creating enormous inventory pressure.

Moreover, online and offline businesses were separated. To cope with emerging new retail scenarios such as B2B, community group buying, video e-commerce, and social e-commerce, companies built duplicate backend facilities for warehousing and logistics distribution for online operations, while offline resources were largely idle, resulting in significant waste.

Image source: Anneng Zhilian

Based on this, Anneng Zhilian launched the "One Pallet of Goods" product for the FMCG industry, which includes the "One Pallet of Goods" unified warehousing and distribution solution, Anneng Zhilian's city distribution product, Anneng's distributor channel IT product, and financial service products. The entire Anneng "One Pallet of Goods" FMCG logistics and supply chain solution realizes value at all levels: commercial flow, logistics, capital flow, and information flow.

Image source: Anneng Zhilian

Specifically, at the commercial flow level, it liberates distributors and wholesalers from diversified functions such as capital advance, warehousing, and marketing, transforming them into operators focused on marketing and point-of-sale service. This allows distributors' distribution networks to directly control down to the county level, thereby strengthening point-of-sale management. At the logistics level, all inventory of brand owners, distributors, and wholesalers is managed as one pallet, with unified warehousing and distribution, integrating warehousing, dry transport, and distribution, improving per-order fulfillment efficiency, optimizing delivery experience, and enhancing competitiveness. At the capital flow level, the ownership of goods at various levels does not change, satisfying manufacturers' inventory pressure models, improving county-level distributors' capital utilization, and accelerating sell-through. At the information flow level, orders from all channels are consolidated, and processes and channels are highly coordinated, improving overall operational efficiency.

-03- Channel Transformation Promotes Industry Ecosystem Cooperation: Co-build, Co-create, and Share

What exactly is "One Pallet of Goods"? How does it help FMCG enterprises reduce costs and increase efficiency across the entire distribution chain?

Image source: Anneng Zhilian

Liang Pengfei stated, "The so-called 'One Pallet of Goods' means that while keeping the original commercial flow unchanged, logistics distribution is stripped away from factories, distributors, and sub-distributors, and Anneng handles unified warehousing and distribution. In this way, the distribution process that originally required five or six stops to reach the store can now be completed in at most two stops. Thousands of distributors' warehouses are reduced to just over a hundred, and the warehouse area of over ten million square meters is now only 1.3 million square meters. The overall inventory turnover, inventory velocity, and inventory turnover days, including the cost of inventory after achieving the same revenue, have significantly decreased."

For brand owners, "One Pallet of Goods" not only allows real-time visibility of inventory data at various nodes, enabling nearby allocation and overall management based on sales in different channels, but also connects online and offline, reducing conflicts between online and offline channels and creating greater market increment. More importantly, "One Pallet of Goods" helps brand owners and distributors optimize costs for warehousing and distribution infrastructure, improving overall operational efficiency.

Hu Jianhua, Supply Chain Director of Hsu Fu Chi, stated: "Before 2019, Hsu Fu Chi had over a hundred warehouses nationwide, and many of them were self-operated. At that time, the operation of the entire terminal warehouse was consistent with the strategy Hsu Fu Chi had just established, because our positioning was in hypermarkets and KA. But with changes in the entire FMCG industry, I think operating warehouses now seems a bit 'luxurious.' This year's pandemic accelerated our determination to optimize the warehouse network. So from April to early September this year, we completed the optimization of 31 warehouses. During the optimization, we also underwent transformation. We converted part of Hsu Fu Chi's original self-operated operations to third-party, using a warehousing and distribution integrated model. The results proved this transformation was very successful, and Anneng Zhilian is the hero behind Hsu Fu Chi's warehouse network layout transformation."

The deeper value and significance of Anneng Zhilian's "FMCG One Pallet of Goods" is that in the future's ever-changing channel and retail environment, it helps brand owners and distributors build an efficient feedback mechanism and service process at the backend, connect online and offline, reduce costs in warehousing, distribution, and management, and improve the efficiency of order acquisition and service.

In the past, online and offline were separated, and information between different distribution levels could not be synchronized. Orders between first-level distributors and second-level distributors were also isolated and could not be effectively coordinated. A typical example: when a brand owner launches a new product, it generally goes through first-level distributors, then second-level distributors, then to point-of-sale stores, and finally to consumers. In the backend, the product needs to go through 3-5 warehousing and transportation steps, each distribution generating a channel cost, naturally compressing profits at different levels.

Image source: Anneng Zhilian

Another example: a consumer in City A purchases a product through a short-video live-streaming platform. The backend process often involves the brand owner shipping the product from the factory to the e-commerce platform's regional warehouse, then to the city warehouse, then to the courier station, and finally delivered to the consumer by the courier. The product also needs to go through 3-5 transfers and transports.

Anneng Zhilian's "FMCG One Pallet of Goods" can, together with brand owners and distributors, build a data middle platform, order middle platform, and inventory middle platform, enabling unified management and allocation of orders from different channel levels and types. That is, after a store or consumer places an order, the commercial flow information automatically aggregates to the middle platform, which selects the nearest sub-warehouse based on distance, ships the goods from the main warehouse directly to the terminal or consumer, reducing handling times and maximizing distribution efficiency.

Jiang Zongxiang, Vice President of Tsingtao Brewery and President of Supply Chain, stated: "We are now integrating online and offline. Offline needs to move online, and online needs to penetrate offline. Such an integration process requires us to use 'One Pallet of Goods' to achieve the coordination between online and offline. Under the 'One Pallet of Goods' concept, no matter which platform the order comes from, we can deliver from the nearest location. A necessary condition for nearby delivery is knowing where the goods are, so this must be solved through 'One Pallet of Goods.' At the same time, regardless of which platform the order is placed on, offline distribution must immediately generate a distribution efficiency mechanism, which also requires 'One Pallet of Goods.'"

In the future, channels will become more diversified, and commercial flow information will become more complex. The value of the backend supply chain efficiency improvement brought by Anneng Zhilian's "FMCG One Pallet of Goods" will undoubtedly become more prominent. At the same time, warehousing and distribution resources among different manufacturers will no longer be isolated but will see more collaboration, jointly building, co-creating, and sharing an efficient, agile, and responsive backend supply chain ecosystem.

In this process, only through digital connectivity, embracing third-party warehousing and distribution service companies like Anneng Zhilian, achieving consolidation in single-point business operations, and achieving efficient coordination of internal and external business processes, can FMCG enterprises build their own core competitiveness.

Final Thoughts:

Social progress and business development always evolve from low efficiency to high efficiency. The refinement of social division of labor and the continuous emergence of new business organizations and models will naturally force the backend supply chain to iterate and upgrade. New Distribution believes that the emergence of new consumption, new channels, and new technologies presents both significant opportunities and challenges for brand owners and distributors alike.

By perceiving changes, embracing changes, adapting to changes, iterating on oneself, and being open and sharing, enterprises and organizations can continuously inject new blood, release more momentum, and maintain vitality and vigor. Only then can they establish competitive advantages and core competitiveness in the increasingly fierce competitive environment in the future.

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