---
title: "Who Is Responsible for the 20% Sales Loss in the Traditional Supply Chain?"
description: "Almost every company has a poor supply chain, even those with annual sales of over 10 billion yuan. Issues like frequent stockouts of bestsellers and promotional items, or goods sitting in warehouses without timely distribution, can cause a company to lose 20% of its sales, turning a potential 10 billion yuan business into 8 billion yuan."
author: "李政权"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2017-08-04"
language: "en"
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# Who Is Responsible for the 20% Sales Loss in the Traditional Supply Chain?

> Almost every company has a poor supply chain, even those with annual sales of over 10 billion yuan. Issues like frequent stockouts of bestsellers and promotional items, or goods sitting in warehouses without timely distribution, can cause a company to lose 20% of its sales, turning a potential 10 billion yuan business into 8 billion yuan.

Click the image for details.
Almost every company has a poor supply chain, even those with annual sales of over 10 billion yuan.
For example, there are always problems with delivery timeliness and order fulfillment rates at the terminal: either bestsellers and promotional items are frequently out of stock, or goods are lying in the factory's or distributor's warehouse without timely distribution and replenishment.
The losses caused by these problems are inconspicuous but very severe. Because **just the stockout issue alone can typically cause a company to lose 20% of its sales, enough to turn a company that could have achieved 10 billion yuan in sales into one that only achieves 8 billion yuan. The missing 2 billion yuan is the loss due to stockouts.**
But when we hold the sales team accountable for this issue, they habitually say:
"The company's production capacity is insufficient."
"The factory's raw material inventory is insufficient."
"The quantity is limited, and those who acted quickly grabbed the goods."
"The minimum order quantity is 50,000 yuan, and only then will the company's logistics arrange delivery."...
The excuses are numerous, but none of them involve their own responsibility.
When we pose this problem to the warehousing and logistics department, they say:
"The orders from various branches and offices are not placed in a timely manner."
"Large orders are too concentrated, the arrival volume is high, and everyone is not pulling goods in time. The warehouse is often overstocked, and the distribution pressure is high."...
When we pose this problem to the production planning department, they say:
"The plans made by various branches and offices are inaccurate, and the deviation between actual needs and the plans is too large."
"We prepare materials and produce according to orders. If the plans are inaccurate, the material preparation and production will naturally be inaccurate."...
When we pose this problem to distributors, they say:
"I paid but still can't get the goods." "I have a full warehouse of inventory. If you don't help me digest it, I can't stock up for now."
"Oh, there are such products on promotion and these new products? I didn't know, because no one told us."
"Damn it, even the logistics companies are bullying us distributors. When we call to order goods, they say they don't have time to arrange delivery. When the goods finally arrive, you have to treat them well, otherwise next time they'll delay two days on the road or smash a few things during handling, and the loss will be huge."...
From the most upstream raw material procurement to the most downstream consumers, the entire supply chain of suppliers, enterprises, distributors, retailers, and consumers is riddled with problems.
If one link is not smooth, all links are not smooth. How can the supply chain not have problems?!
But how will this damn supply chain change in the future?
1. Step forward: take the terminal as the unit.
Why were the problems in the traditional supply chain system so big?
There are many reasons, but one widely overlooked yet extremely important reason is that we adopt a pressure transmission model where the sales team is given targets, and the sales team pressures distributors to meet targets and stock up.
Now, many factors that affect the traditional supply chain operation model are changing.
For example, the key point is: in the near future, large, medium, and small terminals will directly place orders with the manufacturer through the manufacturer's order platform. Not only will we be able to grasp the changes in inventory and sales of various types of terminals, but we can also manage in detail at the level of category, brand, series, and single item. At the same time, we can more clearly understand how much sales volume a promotion activity such as buy-one-get-one, special price, and end-cap display can bring, and what curve changes holiday sales will show during a weekend, May Day holiday, or Spring Festival golden week... These data and information will greatly promote the accuracy of plans and orders.
This trend indicates that our current and past order planning system based on distributors will transform into an order planning system based on individual terminals.
**This transformation, because of the proximity of terminals to consumers and the integration and representative reflection of consumer behavior, has approached the situation of formulating order plans based on consumer demand, and higher accuracy is beyond doubt.**
In addition, this transformation of the supply chain planning model with terminals as the basic unit at the lower end will push down the barriers in the traditional supply chain model that cause information asymmetry and untimeliness, reducing the influence of human factors from all parties.
For example, our sales team used to decompose sales targets and urge distributors to place orders and pay based on data sources that were not detailed or even accurate. They didn't even know the sales data of their K/A stores by time period, category, series, single item, and activity schedule, and for C and D class stores, they were completely in the dark.
And what about our distributors?
They know how much they need to sell each month, but they are often in a "not sober" state—many distributors are confused and unclear about the sales structure of channels, different types of stores, categories, series, single items, promotional products, main push products, new products, regular products, activity schedules, holidays, and regular periods.
**At the same time, how much they stock and how much they need to sell is also more influenced by "pressure" from the manufacturer.**
In this case, the accuracy of order plans will be affected by more instability from the game between the manufacturer and distributors.
But, as we mentioned earlier, the interference of these factors affecting supply chain integration and operation will become increasingly low, because for companies with strong regional penetration and high terminal store coverage, they may no longer need distributors even in the order planning stage.
This article is sourced from Business Trends (WeChat public account ID: lizhengquan02). The excerpt is from the author Mr. Li Zhengquan's book "From Trends to Action: The New Business Ecosystem in the Next Decade + The Road to Enterprise Transformation and Change," published by CITIC Press.


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