All about distribution. Kenneth Rfweart: Distribution channel management. Desktop Book Director for Sales and Marketing Distributors and Wholesale Companies

Dent D.

The book "All about distribution" is the result of a 30-year-old personal experience The author in the field of organization of sales systems. It is a generalization of his extensive practical experience. Often the scope of operations, the complexity or presence of contradictions in the use of distribution channels interfere with companies to see existing problems. Many of these situations are described in the book. To create an effective distribution system, it is required to carry out a detailed analysis of its business model and explore the dynamics of the development of real business situations arising in the supply channels, up to the end users of goods and services. It is this experience that represents a special value is based on the ideas set forth in this book. All materials of the book at different times were used to train and advance the qualifications. For many listeners, English was the second, and sometimes the third language, so the training has also become good practices in the development of business and financial terms, understandable people working in sales and marketing.

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Communication complexity B. modern economy, the presence in any market of a huge number of companies requires the head effective management Distribution channels. Dealers, distributors, resellers, sales representatives and agents, wholesalers, brokers and many other operators, this book will help you learn and use everything efficiently possible paths and means for penetrating the desired market, attract the best of the best and establish partnerships with them, optimize the sales network, based on the strategic goals and objectives of the company and effectively manage the emerging ...

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This book is one of the best practical manuals for planning, creating and developing the company's sales network. It will become a valuable tool for any sales manager, and will help the head of finding an effective solution in a variety of situations, from building a new sales channel "from scratch" to the development of the distribution network to run a new product or access to new markets.
The complexity of connections in the modern economy, the presence of a huge number of companies in any market requires the manager of effective distribution channels. Dealers, distributors, resellers, sales representatives and agents, wholesalers, brokers and many other operators, this book will help you learn and most effectively use all possible ways and means to penetrate the right market, involve the best of the best and install partnerships with them, Optimize the sales network, based on the strategic goals and objectives of the company and effectively manage the emerging conflicts between different sales channels.

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The book is all about distribution - this is the result of the author's 30-year-old experience in the field of organization of sales systems. It is a generalization of his extensive practical experience. Often the scope of operations, the complexity or presence of contradictions in the use of distribution channels interfere with companies to see existing problems. Many of these situations are described in the book. To create an effective distribution system, it is required to carry out a detailed analysis of its business model and explore the dynamics of the development of real business situations arising in the supply channels, up to the end users of goods and services. It is this experience that represents a special value is based on the ideas set forth in this book. All materials of the book at different times were used to train and advance the qualifications. For many listeners, English was the second, and sometimes the third language, so the training has also become good practices in the development of business and financial terms, understandable people working in sales and marketing.

Preface to the Russian publication

russian market Distributions began to form a little more than 20 litersit is back when we have not yet known anything about the existence of the Internet, when there were no mobile communications and email, and the concept of "business literature" was related to textbooks and reference books. Business schools in the country was also not. Information on how to start the way in business, how to build companies, how to manage personnel or working with suppliers, was absent at all. That is why the first generation of Russian entrepreneurs and businessmen created their business practically "to the touch", by the method of trial and error. At the time, for many, the only source of knowledge was the business of foreign companies in Russia. Watching the activity of foreign suppliers who began to master the promising Russian market, we like sponges absorbed business knowledge. Now, when so many years have passed, and our business has long succeeded and resist the test with a not one crisis, we understand that many victories and success have been often achieved thanks to intuition, bare enthusiasm and sincere desire to be better than competitors. Whether we have at the beginning of the way that the amount of information and knowledge of business, which is available now, may have been able to avoid many mistakes and failures, and our business would be even more large-scale.

Of course, the experience of successful companies suggests that there are little book and academic knowledge to create a profitable, growing and dynamically developing business - a strategic vision, business intuition, leadership qualities and a lot more, which is given to someone from nature, and who "It brings up years of years." But the basic knowledge of the "subject", an understanding of the laws of functioning of a business being the necessary base for the successful implementation of any business project.

^ The book "All about Distribution" provides the current generation of managers in the field of distribution invaluable knowledge of functioning channel sales and relationships of its participants. Skill
these knowledge will help companies involved in Distribution & Use 30
ku, qualitatively change business, conquer or keep t ° rye h
to build mutually beneficial relationships with your PP Chedrao, E "
buyers. put or

There are no analogues in Russian, and in English
literature It is difficult to find another as deeply studied * E.* ° * O

Participation of Treoian in the publication of this book in Russia at ^

vITING OF THE Civilized IT Distribution Market, Help IP !!! Includedpartners in the development of their business and mutually beneficial employee * p * ^ ours
Preface
^ U »R ° ™ Ti Director Distributor ^

This book is the result of 30-year-old personal experience in the field of distribution in various positions, starting with an accountant at Arthur Andersen and ending 18 years of work as a management consultant in Via International, a firm specializing in the strategy for building sales channels and the implementation of products and services. During this time, I was led to work with the best practitioners. But not only - often it is difficult to serve as a source of the most useful lessons.

Among the VIA clients there are companies that have achieved tremendous success in the market and possessing the most famous brands (yes, they also sometimes need help). Working with them, we had the opportunity to access extensive practical experience. Often the scope of operations, the complexity or presence of contradictions in the use of distribution channels interfere with these companies to see existing problems. Usually they have relief, learning that we can bring some clarity and objectivity into a situation and recommend effective strategies based on commercial logic. Many of these situations are described in the book, but in most cases we maintain the anonymity of the participants. However, you will also find examples of real companies and situations. They are based on the facts that have long become the public domain or well-known among people of our profession.

To fulfill our work, it is often necessary to carry out a detailed analysis of the internal model of organizing our customers and explore the dynamics of the development of real business situations arising in the supply channels, up to end users of goods and services. It is this experience that is a special value and is based on the ideas set forth in this book.
Finally, we had the opportunity to work with many small companies and enterprises, usually - immediately after investments of venture capital, when all interested parties expect a sharp increase in sales. This growth is usually determined by entering new market segments, mastering sales of new goods, which means the need to build new sales channels. In the process of work, we received a lot of cruel lessons regarding which factors attract players who can provide the required growth in the appropriate supply channels, and these lessons are also set forth in the book.

All content of the book at different times was used to train people who worked in distribution. They sought her to understand her deeper, looking for new ideas and models that could be applied to work. For many of these people, English was second, and sometimes the third language, so the training has also become good practices for the use of business and financial terms, understandable people working in sales and marketing (and sometimes on the contrary).
Additional information O.^ Via Look at the site www.. viaint.. com.

Thanks

For the fact that the book was generally written at all, it is worth thank one distribution manager from Germany, who asked me after one of the seminars to draw up a list of recommended literature on the topic. And I found that I don't know about one such book. He threw a seed into the soil, which in a few years sprouted and brought the fruit.

I'm in debt to my colleagues by profession and partners inVia. , especially Rosemary Whitet, Michael White, Guyem Suorbrick and Sharon Davis, for their support and for giving me enough free time to write a book. I borrowed them professional experience, as well as the knowledge they have shared with me. Their reviews and reviews have made a significant contribution to the end result, as well as the review of Rob Ebshire from the companyPublicis With which we work together over many of our projects in the field of retail sales. Late Professor Erin Andersen fromInsead. representing the scientific community was an excellent source of inspiration, as well as Professor Ann T. Koflang fromKellogg School Of Management . Of course, the creation of a book cannot be submitted without the constant support of our customers, continuing to share our difficult tasks and problems. There are no such words that you can express your gratitude for trust and sincerity. Special appreciation to Phil Darnell from the companyHewlett - Packard whose ideas inspired several interesting projectsover which we have the honor to work.

In preparation for the publication, Sean Daei was provided, the bustling book, re-redrawing almost all the illustrations and tables. In all the remaining mistakes, only me is to blame.

Finally, I want to thank for supporting my family, which provided me with the opportunity to work for a long time and distracted only by tea drinking and coffee breaks, occasionally interested, who will be a murderer in the last chapter - watchman or forester. Now they can make sure that this book is somewhat different genre!

Part 1
Introduction or Why do business models matter?
Chapter 1

Introduction

For whom this book

This book for any person whose work is related to marketing channels, sales, distribution or service provision. She for any, whose obligations include creating demand and customer satisfaction in products and services. If any of the terms listed below are related to your work, then this book is for you:


  • ways and ways to enter the market (routes to market);

  • strategy for the supply of products and services to the market (go - to - market);

  • distribution channels(Distribution Channels);

  • channels receipt of goods to the market (channels to market);

  • sales channels (Sales Channels);

  • management of customer relations or partners;

  • sales of legal entities(Business to Business);

  • sales retail consumers (business to Consumer ).
^ This book for managers of companies that promote markets supply, sell and serve goods or provide services. othersuppliers; She will be useful to anyone who is in the front of these relationships.

If your work has at least a small element of commerce, then working on the book I meant you. It is written for people who do not consider themselves the experts in the field of finance, but they understand that they should well understand in the economy of their enterprise and enterprises with whom they work. It is a source of practical knowledge of difficulties, with
all parties participating in the promotion and supply of goods and services are facing. The use of these knowledge can open up new business development opportunities for you.

On the other hand, if you understand Finance, but you know relatively little about the features of distribution, this book will allow you to understand specific problems without many years of practices, factors, systems of relationships and sources of success applicable to all participants in the Creation of Excellers: Intermediary Companies , manufacturers or customers.

The book is intended for anyone who manages relations between two or more participants in the supply system, whether it is a customer service manager, a partner management manager, distribution channel management manager, sales manager or customer loyalty manager. And, of course, it is intended for managers and direct chiefs of employees working in these critical roles. Anyone who relates to these areas should know what commercial consequences of interaction between different players in the market and how they can be used to conquer and keep their positions. To build interrelationships beneficial to both parties (no matter who they work, "by the" seller "or" buyer "), they need to understand how their own enterprise is arranged.

In order for any product to come to his target audience And his market share grew, the supplier must create a distribution system that will become a business model and for him,and for all intermediaries in the supply chain. This book is for everyone who is trying to improve the business indicators of their company or in whose obligations are the management of the behavior and activities of other players with whom their company interacts on a mutually beneficial basis.

There are many books and finance courses. Some of them are financiers, many - for "non-financial managers. In most of these books, the company-producers are referred to; In some, there are even one or two chapters about manufacturers of services. There are also books on channels and supply systems, often written in terms of sales or marketing, describing, for example, how to minimize contradictions or strengthen your influence in the distribution channel. However, a book has not yet been published, which would describe the business model of companies specializing in the distribution of goods and services, and written for people whose position does not require special accounting knowledge ... So here she!

Working on the book, I did not pursue the goal to teach you to deal with accounting balances, accounts of profit and loss or depreciation ... Although we hope that by reading it, you still can do it. She will help you understand:


  • why the management of working capital is critical for distributors;

  • how to respond to the requirements of distributors or retailers about increasing the profitability of their sales, if you occupy a leading market share;

  • how to get from the supplier the resources you need to achieve the planned growth rates;

  • how to increase your share in the business of your partners, even if they claim that business with you is not as profitable as a business with your competitors;

  • how to acquire a significant weight in the distribution system, even if you have a small market share;

  • how to rationally use limited resources, directing them to the development of distribution channels so that they bring the maximum income;

  • how to increase your influence on partners, which may not even sell your goods, but whose recommendations are critical to the formation of customer preferences.
What is a business model?

Since it is stated that everything about business models will be told in this book, it is better to immediately explain what we mean under the term "business model". The business model is how the company retrieves profits from its activities. This is a financial reflection of the role, market position, strategy and results of a business plan for a particular player in a particular industry. This is logical financial results Economics of the industry and its sales infrastructure. The business model is static - in the form of a certain structure of prices, profitability, cycle of capital turnover, etc., and at the same time changeable - in the dynamics of costs, market shares, profitability and competition. So a business model, for example, a supplier of sanitary products will be similar to something predictable, and something is predictable from business models of distributors of computer goods, music or cream cakes. The same can be said about different players in the "ecosystem" of one channel: their share, balance of strength and strategy determine where And how they will receive a profit, what they should invest and what should be the scale of these factors in relation to the size of their business.

In this book, we will demonstrate you a link between these factors and their influence on the structure of the business model. We will help you to understand the inherent distribution of restrictions and interdependencies with which managers are constantly faced by working with the described types of business models. We will show you ways to increase the performance of each of the players you manage or with which you negotiate. These restrictions are at the same time and opportunities. For example, retailers do not hold significant commodity inventories due to the limited or high cost of retail space (attractive outlets usually have a frightening rental cost). An enterprising supplier with effective logistics can offer the delivery of "exactly on time" or assorted the assortment of the retailer, thus obtaining the advantage of other players who do not have such opportunities, and increasing its share in the relevant category of goods. The retailer understands that he cannot afford empty counters, so he will be ready to put up with a more modest profit in exchange for a guarantee that its commodity reserves will correspond to demand and rehast timely. The ability to balance the two of these aspects, expressing them in numbers, at first glance, is not directly related to sales and marketing, but it has a much longer-term impact on partnerships, rather than a short-term marketing action in order to increase the share of certain products in sales.

In this book, we, figuratively expressing, we teach you to catch fish, and do not catch it for you telling you about the main rocks of the fish, that is, about the dominant business models and their characteristics inherent on them, we want you to become real fishermen. As a result, you can assess the situation in any business model of any distribution system on any market from any point of view (whether to manage partners, sales or purchases), identify problems, detect the available opportunities and form a business development strategy that best will help you achieve your goals.
How this book works

This book describes the business model of all the main types of intermediaries in the distribution system. We will focus on the following topics:
The role of players- In most industries, the role of key players is almost the same, although there are several special cases and exceptions. However, the terminology used in different industries can differ significantly or have several different readings. To make sure that the terms adopted in your industry are not leaving you in the wrong direction, we give a definition of key roles so that you can recognize, with what players are dealing;

How do business models work - We will consider the main features of the role of each player in the distribution system that attach fundamental outlines of the business model inherent; We will follow the impact of well-known economic factors and the emergence of characteristic problems, which determine the relevant management priorities. We will show you key features of business models and how they are determined by the roles of individual players, the structure of the industry and the features of the distribution system - we describe a business model by a simple language and offer a system of key indicators that show its dynamics, bring numerous examples and show how Various market factors form the structure of business models and affect their effectiveness;

Key performance indicators and their role in business management - We will define and describe all key indicators, as well as how and why they are used. We define a number of reference indicators that will help you develop a sense of norm and understanding what can be done to improve them. We will show you how they are interconnected, what problems it causes in the work of various players of the distribution system and which compromises requires. We will consider several situational studies that demonstrate how successful players applied their strategies to solve problems arising in distribution;

How to raise sales - Understanding the key goals of managers with whom you are doing business will formulate your suggestions in significant terms for them. You will be able to show them the mechanism of the positive impact of your suggestion on their business models: to demonstrate that resource investments in your goods and services are beneficial to both parties and that work with the segments in which you want to grow will bring them more high profits. Similarly, this will help protect your positions: when you are asked to give in profits or increase investment in the development of the market, you can specify how much benefit such a step will bring for their business in general. Thanks to a comprehensive understanding of the business model, you will acquire great confidence that will allow you to develop customer relationships at a higher strategic level of the management hierarchy.

After reading the entire book, you will acquire a powerful resource of numerous practical examples and recommendations. At the same time, we also recommend that you contact this book when you get specific tasks or unfamiliar situations. Acquaintance with some technical elements of business models may seem boring reading until you come across these questions in real lifeAnd then you gratefully remember detailed explanations and detailed examples.

Despite the fact that our task is to explain to you the general and specific aspects of business models on numerous examples from real life, it should be indicated that we often express only one of the points of view. There are lessons that have yet to learn, as well as deeply rooted behaviors, contrary to commercial logic: market leaders who use the tactics of a new player in the market; distributors and resellers providing discounts for scarce products; Capital, who is squandered without any understanding of his true value. We are pleased to provide you with knowledge accumulated years of practical management and counseling. They will help you avoid many traps. Take advantage of them, otherwise you can find that competitors have gained you at the next turn and takes the market share directly from under your nose!

Chapter 2
Why business models are important

Distribution value

Usually about half of the price paid by the buyer for the goods are accounted for by the delivery associated with the delivery of the goods to the buyer (and the buyer to the goods). Over the past 15 years, this share has increased significantly, since production costs decreased, while markets were divided into segments, and the promotion and delivery and service channels were much more. This is usually the part of the price that is worst controlled and is less clear.

The development trends of consumer demographics and organizations contribute to the emergence of smaller market segments leading to their further fragmentation. Moreover, innovations in goods and services have repeatedly increasing the available choice. Even the simplest consumer goods can now be delivered to numerous consumer segments on numerous channels specific to different countries and regions. Many of these channels include one or more intermediaries: wholesale suppliers, Distributors, dealers, brokers, organizers of complete supplies, retailers - or rely on the figures of influence that form consumer preferences or they themselves express their preferences on their behalf, for example, architects and designers. Very few companies know how to determine the cost of using one or another channel, whether it is straight, single-level (for example, "supplier - dealer - buyer") or two-level (for example, "Supplier - Distributor - Retail Merchant - Buyer") Distribution. Even fewer companies can calculate profitability. use of various intermediaries. We found a big scatter in the costs of costs and profitability of distribution channels and individual intermediaries in all sectors and distribution systems. Companies,whichwe decided to spend the resources for the analysis of your system promotion and services, could significantly reduce costs. This allowed them to increase profits or reduce prices and get as a result competitive advantage.

Ways to enter the market determine the circle of available consumers. Without the right approaches to the market, you will simply do not reach your target audience. Zouchim by the company's desireCoca-Cola. in the 1990s, the purchase of Coca-Cola was becoming more and more accessible. Look at the result: almost anywhere in the world you are only a few minutes from the place where you can buy Coca Cola at any time of the day and night. Many industrial companies still experience difficulties with access to their potential consumers and cannot find the channels that will want to deliver (note: "Write", and not "be able to deliver) their goods to the target market. Creating a market entry channel may require significant investments in the development of specialized internal systems and infrastructure capable of responding to market conditions, collect and evaluate sales predictions, organize marketing programs and advertising campaigns, plan and carry out complex logistics. It is very difficult to simultaneously create a new channel to enter the market and at the same time ensure the profitability of the distribution system and the planned growth trajectory. The distribution system can not only contribute to the satisfaction of demand for your products and services, but also to form it. Usually, such a task is entrusted to the local agent in the overseas market. The compensation system for its efforts is directly related to the achievement of the target level of sales, and the supplier is limited only by operating support. The distribution channel can be used not only to meet the demand you have created, but also create the demand that you will satisfy. Your distribution of player roles in the distribution system, investment in its development and your prices will determine how efficiently you can penetrate the target market and what profit you can get.

The method of market penetration has a critical impact on your brand. How can you guarantee that level of service or quality that is laid in the brand if you do not control the process of market penetration and do not control your distribution? If your brand is built on the quality of a product or service, the distribution channel must comply with this not only at the time of purchase, but also in the field of warranty service and service support. How efficiently you are stimulating partners to perform this task, directly affects the perception by buyers of your brand.

And if your brand is built at a low price, then your distribution channel must correspond to this task and maintain an effective level of costs.

Often the distribution channel also forms conditions for product differentiation. It happens that you can demonstrate the difference between your product from the goods of competitors, only using a specific channel. CompanyDell in the computer industry is a good example: it sells goods, by 95% no different from the goods of competitors (standard computer components based on Intel technology and operating system are used. Microsoft.). The channel used by the company is direct sales over the Internet - until recently, it was the main source of its differences from competitors who sold their products through retail partners and dealers. Similarly, this channel gave them greater flexibility in pricing.

Today, your financial director wants to receive a higher return for smaller investments. Never before the cost of promotion and distribution of goods were not the subject of such close attention of the leadership. High costs, dependence on business partners, the complexity of market structures and processes today make the ability to manage its business model distribution prerequisite Successful business.
Dynamics of distribution systems

History suggests that distributionit is always difficult to buildabsolutely correct. To understand the reason for this, we need to start with the definition of typical categories of players in the distribution system and determine their roles. On the image2.1 the three main structures of distribution systems are shown:

Direct - in this structure, the supplier owns and manages all the resources in the goods supply chain up to the final buyer (or group of buyers]. Recently, the number of companies using this model has increased due to the possibilities that the Internet provides. Examples -Dell. in the computer industryEasyJet. in the lower price segment of air transportation,Charles Schwab. in the stock business andLands End. In the manufacture of clothes. Using a direct sales model, all these companies rose by reducing costs, or proposals more convenient way to buy their customers, or both at the same time. In addition, with direct communication, they receive important information about clients and can quickly respond to changes in supply and demand, regulating their prices and forming special offers. This model implies the availability of sales managers usually working with very large corporate clients in most business for business sectors.

Single-level distribution - this system assumes the presence of one level of intermediaries between the company and its customers. Intermediaries can perform a number of functions: expand the territory of the market coverage (for example, foreign agents), provide special services to supplement the offer (for example, the installation of greenhouses and greenhouses), or in a certain way to position the goods in the channel already known to consumers when the supplier needs to be taken into account already established Customer habits (for example, retailers). This system provides simple and sometimes immediate access to the current consumer segments or the use of investment results already made by intermediaries, such as foreign agents, in creating warehouses or system of sales representatives. The main disadvantages are the need to share a profit with an intermediary and some kind of focus of sales, since the mediator usually trades several brands, including the goods of potential and direct competitors (remember the variety of refreshments or confectionery facilities standing on the middle shelves grocery Store). In addition, the presence of an intermediary between the seller and the buyer creates a distance between them and may have negative consequences depending on how much the first is ready to share information or obliged. Two-level distribution - in many markets there are literally thousands of potential intermediaries serving consumer segments. Each of them may make only a few sales per month, and the costs of their searches and management of commercial relations with them cannot be justified by the profit received from such a low sales. Imagine that you are a manufacturer of especially delicious chewing iris. You need to attract thousands of small boys and girls (along with their parents and grandparents), which should find your iristers in local newsstands, tents, at stations, at airports, at gas stations, in confectionery, large supermarkets. From the point of view of costs associated with the organization of sales and infrastructure, it will be excessively expensive to work separately with each of the thousands of similar shops throughout the country. Fortunately, someone has already done it for you, creating a relatively small number of small-winding stores "Kesh-end Carrie" format, where the owners of small retail points come once or twice a week to replenish their commodity stocks. So that they find your goods, you just need to supply these small-winding stores with your products (we will look at this task in chapter 10). Thus, a two-level distribution system is created: you are a small-pool shop - the kiosk is a buyer. Similar models you can detect in the computer industry and the mobile industry, where thousands of local dealers serve small and medium-sized companies. The advantage of this model is to use the already existing distribution system and cost savings, which allows the manufacturer to work with a massive, but small-winding market. The fee for this is an even greater distance from consumers and markets.

Multi-level distribution (in fig. 2.1 is not depicted) - similar to a two-level model, but with additional intermediaries between the supplier and end consumer. Such a system is appropriate in the markets for which the complex geographic structure is characterized or there are special economic conditions. For example, a cigarette trader in Zimbabwe sells one cigarette, bought a pack at a local store. In many emerging markets, the companyUnilever Sells soap in a small package sufficient for one-time use using a distribution system with a multitude of intermediaries. China is often found five- or six-level distribution systems supplying goods to the central areas that are far away from prosperous commercial centers located along the Eastern Coast.

Julian Dent. All about distribution. Management of sales channels As sometimes happens in pursuit of "artistic" translation, with the name of this book is also not all right. This is what it was in the original - Distribution Channels. And, indeed, the book is dedicated not to "everything" about distribution, but a narrower area - the study of business models of players in the distribution channel. There is practically nothing about product marketing. But quite a lot about financial indicators, management of growth and building relationships between different types of players in the channel. In fig. 1 shows typical distribution channels. Another type of players - OEM (not shown in the figure). OEM (Original Equipment Manufacturer) is a term describing the situation when one supplier (OEM) produces a product that is an integral part of another product. Fig. 1. Typical distribution structures of the business model are the key to the successful promotion of goods. If you need to build a sales system through partner intermediaries, then you need to understand how their business model works. Then you can explain to them the proposal of your company in terms of understandable and significant for them. Unfortunately, in any industry, you can find examples of marketing programs at all that do not take into account the business models of partners. Because of the fear, to spoil relations with the channel supplier can accept the program, even if it harms his business. An obvious example - an award-out at the end of the Quarter for "Downloading Channel Warehouses", stimulating dealers purchasing a large amount of goods. Be careful when comparing the financial indicators of different companies. Despite the achievements of accounting, there are many ways to compile reporting. For example, take two completely identical companies. Both by the end of the year had excess goods in warehouses. Company A prudently dropped by 50% goods that have broken in stock for more than 3 months, and the company B writes off only 25% of the cost of goods that have broken 6 months. The company's profits and this year will be lower than that of B. But the next year the situation may change. Golden rule - use financial indicators in order to ask questions [how they were calculated], and not draw conclusions. Distributors and Wholesale Companies Loan Provision - a key service that allows dealers to supply and install their products to customers before receiving payment, without investing in this own financial resources. Dealers seek to increase the liquidity of their finances by purchasing goods from three or more distributors to maximize all available lending capabilities. The distributor seeks to establish justified credit limits and distribute the risk of thousands of trading operations1. Distributors rarely can determine which volume of logistics costs falls on a specific batch of goods shipped, and their prices for delivery services are usually arbitrary and installed so as not to scare buyers. When the industry enters the phase of maturity, profitability from the main activity is reduced, and the distributor begins to charge for the provision of related services. For example, for delivery to the credit on behalf of the reseller. Sometimes such a service may include the issue of shipping documents issued on behalf of the reseller. In emerging markets, where financial and distribution capital are still small, to finance quick promotion on new market Consignment conditions can be used. Different types of distributors are determined by their business model (Fig. 2). Distributors-logisticians - distributors operating in the markets where goods are "bought", and not "sold", for example, spare parts or consumables. In fact, these distributors provide logistics service provider. Fig. 2. Types of distributors depending on the business model in many distributors marketing department It is a source of additional income that attracts the supplier funds by supplying innovative marketing tools and activities. Supplying goods by thousands of local trading intermediaries, the distributor takes credit risk for these sales. Its task is to manage the credit portfolio to minimize the amount of irrevocable debts and losses associated with them. Distributors are an important source of information about the market. Often, the possession of this information is considered by them as an important competitive advantage. Even the owners of famous brands can lose their market access, spoiling a relationship with the distributor. 1 It seems that the expansion of credit lines will increase the business, but also increases the risks. Here and further approx. Baguzin Roles performed by a distributor for customers and suppliers define the business model of the distributor and its key features. The business model of the Distributor is capital-intensive, which is associated with the need to have warehouse stocks and provide a commercial loan of resellers. Consider a typical financial report of the distributor (Fig. 3). Fig. 3. An example of a distributor's financial distributor's financial statement (working) Capital distributor includes: Commodity reserves + receivables - Credit debt Profit is a very small value between two large. The success of the business model of the distributor is the ability to properly balance the level of profitability of operations with a working capital profile for a particular product supply. The role of product managers is critical in the work of the distributor. Payment of their labor should be associated with the level of profit, and with the efficiency of working capital management (or at least warehouse stocks). Distributors who are putting a business growth should invest in expansion with caution so that the growth rates of their costs exceeded the growth rate of sales. Unlike warehousing, the performance of which can be dramatically increased in just a year, the introduction of new information technologies often pays off only a few years later. Distributors are increasingly striving to translate most of the costs from a constant category to a variable, resorting to outsourcing the main elements of their infrastructure, including transport, warehouses and even call centers. Another dilemma facing distributors lies in the field of sales over the Internet. By increasing the share of sales over the Internet (in contrast to the reception of orders by phone), they lose the opportunity to offer the client a more expensive version of the goods, carry out cross-selling or promptly reacting to lower prices from competitors, but can significantly reduce the cost of issuing orders. Distributors who are trying to grow, not paying due attention to planning, very soon discover that the cash situation is rapidly deteriorating, despite the fact that sales and profits increase. The task is to accelerate capital turnover. This means tightening customer lending conditions, reducing inventories, expanding credit lines of suppliers and an increase in their return period. Any of these methods may affect the key trading relationships of the distributor and in contradiction with its growth plans. Profit and profitability rate of gross profit \u003d (revenue - cost realized products ) / Revenue * 100% or in our example (19 316 - 18 308) / 19 316 * 100% \u003d 5.2% in normalized indicators there is a significant drawback - they do not take into account the size of the transactions. Competent distributors should not build a system of promotion management managers only on the basis of the gross profits, expressed as a percentage, which illustrates Fig. 4 Figure 4. Comparison of profit indicators earned on different brands, in percentage and monetary terms. Profit structure for goods assortment. Even inside certain categories of goods, there are always positions that are less sensitive to price change, so the price of them can be increased without prejudice to the total sales. For example, a distributor sells bags for laptops with such high profitability that on these sales it earns more money than on the sale of laptops. Differentiated pricing policy inside the category or for different categories is called portfolio pricing. Experiment with prices, and find out which goods will result in price increases, and which - no. Since the profit is a small magnitude between two large, sales managers should be very neat when distributing discounts. It is useful to analyze the distribution of sales in the profitability ranges of transactions (Fig. 5). Figure 5. Dynamics of revenue ratio and gross profit rate If the use of minimally possible vacation prices is applied. The study of the extreme right side (Fig. 5) - which goods and what clients were sold with a high rate of profit - can open interesting niche possibilities, on the basis of which it should be attempted to build a part of the sales system. If you analyze the sales structure (the relationship of the magnitude of the transactions and size of discounts), it is often possible to see ways to use discounts to increase profits. In fig. 6 The schedule was built on which customers are ordered by sales (left to right, the revenue curve decreases smoothly). If you follow normal business logic - provide more discounts for larger transactions, then the second curve on the chart (gross profit rate) should smoothly climb up, being a mirror reflection of the sales curve. Instead, you can see that many small customers are provided with significant discounts. Fig. 6. Distribution of the norm of gross profits Depending on the volume of purchases of certain customers in the formation of profit contributes a number of factors. For their accounting, the parameter is used by the value of the specific profit \u003d (revenue - the cost of realized products - variable costs) / revenue * 100%. To attribute the cost of costs to a specific product or client, distributors use certain distribution algorithms, which means that the validity rate indicator of the definition Not so accurate, as an indicator of the norm of gross profits. Brands occupying a leading position on the market bring less gross profits, but also the costs of their promotion and selling less. You can consider this by analyzing the delicacle. For a distributor, it is important to analyze the specific profit, both in the context of the products and in the context of customers. Get rid of your largest client if he brings losses! To measure the efficiency of the operation, the distributor uses two indicators: the average order size and the average costs for its processing. Even a small increase in the average order size or a slight decrease in its processing costs greatly affects the final profitability indicators (Fig. 7). Fig. 7. Customer service profile or client service group Operating profit rate \u003d (revenue - cost of realized products - overhead) / revenue * 100% in our example (19 316 - 18 308 - 952) / 19 316 * 100% \u003d 0, 29% Number of net profit \u003d (revenue - the cost of realized products - overhead costs - payment of interest) / revenue * 100% in our example (19 316 - 18 308 - 952 - 12) / 19 316 * 100% \u003d 0.23% The distributor enters the holding, the main indicator will be the norm of net profit before tax. Tax management will be carried out at the Holding level. Given that the overhead of the distributor is relatively small, to increase their profitability, they can hardly be reduced. Therefore, sales growth and increasing profitability is the only strategy that can give the result. Working capital Capital - a descriptive term for capital associated with a distributor's trading cycle. Capital to finance the cycle "Money - product is money", that is, the time that money paid to suppliers returned to the Distributor as a result of sales of goods to customers. The shorter the cycle "Money - the goods is money", the less working capital requires a distributor to finance its activities. Control in the three components of the working capital cycle is the primary task of the distributor. DPO accounts payable period \u003d payment accounts / cost of realized products * 365 days in our example 1550/18 308 * 365 \u003d 31 days Commodity reserves in the days of storage DIO \u003d volume of inventories / cost of realized products * 365 days in our example 1408 / 18 308 * 365 \u003d 28 days Evaluating the size of warehouse stocks, it is necessary to keep in mind the seasonality factor. Usually the end of the financial year distributor falls on the end of the peak season, and this allows the financial balance with small trade in stocks, which is a sign of good management.2 The repayment period DSO receivables \u003d debt receivables / revenue * 365 days in our Example 1897/19 316 * 365 \u003d 36 days Duration of one working capital cycle \u003d DSO + Dio - DPO in our example 28 + 36 - 31 \u003d 33 days turnover \u003d 365 / Duration of one working capital cycle in our example 365/33 \u003d 11 times a year of the business model Distributors may differ. Some - work with a narrow assortment to maintain inventory in low levels. Others - reduce the number of suppliers, trying to increase the credit periods, which in some cases can lead to negative overwhelming capital, that is, DPO\u003e (DSO + DIO). This can lead to accumulation of cash, which can make a profit (deposit in the bank), which is used to reduce prices or produce super-profits. The performance above was considered by the indicators of the governing partnership and revolving capital. Consider the indicators that are sometimes called the performance that reflect 2 is not because some companies begin the fiscal year on March 1 (or April 1), which makes it possible to reduce the collar characteristic of January 1, which immediately follows the end of the high season? At the same time, profitability and working capital, but at the same time depend on individual goods, commodity groups, suppliers and customers. The norm of gross profits on investment in the inventory GMROII \u003d gross profit / stocks * 100% in our example 1008/1408 * 100% \u003d 72% in most distributors there are natural business rhythms, and 80% of their goods fit into a certain range of profits and turnover . But there are products with low indicators that product managers find it necessary to save in the range (for completeness, or on the basis of customer needs). In this case, honestly ask customers to pay this service, ensuring higher profitability. GMRIIs use as an indicator of production managers. Specific earnings for investment in inventories CMROII \u003d Specific profit / stocks \u003d Specific profit / revenue * Revenue / Commodity reserves \u003d Profitability * Turnover Using profitability and turnover of individual goods (categories), Product managers can build a product portfolio profile in relation to to the average indicators3 (Fig. 8). Fig. 8. Profile of the portfolio of goods according to the characteristics of profitability and turnover. Self interesting goods - It is sleeping. Some of them may contain a component of the services, and most likely there are stable demand for them, and they do not need to promote efforts. There may also be products that are at the beginning of the life cycle. Interesting opportunities for sales development can provide the connection of running and sleeping goods. Considering that in many industries the average number of product items in the Distributor's account is less than two, it is easy to understand that the correlation coefficient will be low. Investments in the training of sales managers to effectively combine sleeping goods with driving, can bring a significant increase in profitability. The rate of arrived at the Capital GMROWC \u003d gross profit / about. Capital \u003d gross profit / revenue * revenue / about. Capital Wheel. Capital \u003d Commercial stocks + receivables - accounts payable in our example 1008 / (1408 + 1897 - 1550) * 100% \u003d 57% GMROWC monitoring software special categories It can be used to determine the tasks and calculating compensation of product managers. Like any specific GMROWC indicator, it is necessary to use together with value indicators of sales. 3 With this technique, there will always be "best" and "worst". If you apply benchmarking, it is possible to obtain an absolute matrix (regardless of average). Sustainable development in the long run, in addition to the previously mentioned operating performance, it is important to track fixed assets, capital structure and long-term obligations. Profitability of net assets Rona \u003d operating profit / (working capital + Cash + basic assets) in our example 56 / (1755 + 401+ 423) * 100% \u003d 2.2% profitability of the capital used \u003d net profit before tax / (total Assets are interest-free liabilities) In our example 44/1756 * 100% \u003d 2.5% (no interest-free liabilities) Rotation to the nested capital ROIC \u003d operating profit after paying taxes / Invest capital \u003d (net profit after paying taxes + interest) / ( Summary Assets - Cash Cash Surplus - interest-free current obligations) in our example (28 + 12) / (423 + 3706 - 401 - 2314) * 100% \u003d 2.8% How to interpret the ROIC value? It is necessary to compare it with the weighted average cost of capital (WASS):  ROIC\u003e WASS  The control command has created an additional cost  ROIC< WASS  управляющая команда уничтожила стоимость Создание стоимости VC = Операционная прибыль после выплаты налогов - (Инвестированный капитал * WASS) Если, например, WASS = 6,2%, то VC = 40 - (1414 * 6,2%) = -48 млн. Произошло уничтожение ценности. Есть много свидетельств тому, что VC - это показатель качества работы, наиболее тесно связанный с преумножением средств акционеров. Создание ценности требует от менеджмента тщательной работы и с прибыльностью, и с управлением капиталом. Улучшение лишь одного аспекта работы предприятия недостаточно. Управление созданием ценности на операционном уровне. Искушенные дистрибуторы анализируют показатели создания ценности на уровне отдельных клиентов и поставщиков. На рис. 9 изображен реальный пример анализа клиентов дистрибутора. Рис. 9. Пример анализа ценности, созданной несколькими клиентами. Размер круга - величина созданной ценности. Клиент А создает наибольшую ценность, принося высокую удельную прибыль, несмотря на высокие издержки. Персональному менеджеру на будущий год будет поставлена задача постараться уменьшить издержки.4 Клиент В создает прибыль благодаря низким затратам на обслуживание; нужно попытаться увеличить прибыльность операций с ним. Клиенты E, F и G находятся в прекрасном положении: высокая прибыльность, низкие затраты на обслуживание; нужно наращивать объем бизнеса с ними. Управление ростом Потенциальная способность к росту = Чистая прибыль после налогообложения, % * Цикл оборотного капитала В нашем примере 0,14% * 11 = 1,6% То есть, за счет собственных средств компания может расти лишь на 1,6% в год!  С ростом объемов операций периодически возникает потребность в увеличении основных средств. Если прибыльность находится на низком уровне, то скачкообразное увеличение постоянных издержек может приводить к периодам убыточности бизнеса (рис. 10). Чтобы улучшить показатели бизнес-модели, необходимо максимально откладывать новые инвестиции. Это означает, что предприятие будет месяцы (или годы) работать на пределе своих возможностей (рис. 11). Здесь важно не перегнуть палку, чтобы бизнес не стал сокращаться из-за недоинвестирования. Рис. 10. Профиль взаимодействия удельной прибыли и фиксированных расходов по мере увеличения объема продаж. Рис. 11. Профиль взаимодействия удельной прибыли и фиксированных расходов при использовании стратегии отложенных инвестиций. Сложнее всего добиться верного баланса между ростом бизнеса и новыми инвестициями при крупных модернизациях information systems. Our experience shows that the permutations in the first three distributors are due to the successful or failure of IT, and not distinguish between prices, assortment or quality of service! 4 ambiguous offer. Perhaps it is the high costs that provide the client for the services of this quality, thanks to which business with it becomes such profitable. And further. The involvement of people in the process of changing changes is critical to the implementation of growth tasks. It is usually more efficient than "management with the help of numbers". Currently, storage and delivery costs constantly fluctuate depending on the choice of a strategy of centralized or several local warehouses. A distributor seeking to grow carefully to apply to additional storage places. Growth carries with me and complication of the management system. Each subordinate should understand how its actions can affect the result and quality of the company's work! How to sell distributors. Remember that you [as a supplier] sell a commercial relationship; You sell your value for the distributor, and not your products. Players of the latest link chain of the role of players are determined by what share in their business is occupied by the services provided by the final consumer (in fig. 12 this share is growing from left to right). Fig. 12. Roles of the players of the last stage of the sales channel. To make trade discount "Loin" in the trading channel, it is necessary to make a part of the discount or even all its non-maritown so that the seller cannot give too large discount Buyer in case it does not earn it himself. For the company providing services, you should not hire additional employees only to cope with the temporary lack of labor. What will you do with "superfluous" personnel when the volume of orders return to a normal level? The business model based on the services is shown in Fig. 13. Fig. 13. Value creation tree for service provider. Fig. 14. Gross profit indicators depending on the role of the service provider. The rate of return of spent resources \u003d the amount under the contract paid by the consumer / (the total amount of resources used * standard rates) How to sell resellers? Successful suppliers organize advisory councils consisting of representatives of their partners who are collected on a regular basis (for example, every six months). This allows suppliers to check the relevance of their proposals compared to competitors or the reaction of the channel and the market for planned changes. Partners readily comment on what they do not like in the planned changes, but prefer not to participate in the development of proposals for the entire channel as a whole. Partners willingly talk about the activities and plans of competitors, however often seek to distort the situation in the hope of gaining benefits for themselves. Experienced suppliers know how to behave in a similar "negotiation process" and how to leave a dialogue at the strategic level, delay the decision of private tactical issues to discuss on individual meetings with representatives of partners. What awaits the reseller from the supplier? The most important quality of the supplier for any player in the distribution channel is predictability. Sometimes managers working with partners do not have a sufficient depth of commercial and financial skills. It is recommended to train them in finance courses for non-financial officers, which will allow them to acquire useful for practical application Skills work with partners. It seems helpful to ask your channel partners to evaluate as part of surveys not only your results, but also the results of your very strong competitor. This will allow you to clearly imagine the magnitude of the gap between you. Traditional indicators of assessing the competitiveness of your offer always describe a situation with some delay - your sales and share of operations with a partner are beginning to decline after your relationship with him. What awaits the reseller from the distributor? Assortment, optimal prices, availability of goods in the warehouse, convenience of work, lending. Many distributors may encounter a decrease in the client base due to the fact that resellers seek to reduce their dependence on the only supplier or increase the amount of credit resources received. Management relationship with reseller. The key to success is two factors: the presence of a strategic relationship management process and the presence of a competent manager for working with a partner. The true purpose of managing the relationship is to "increase the cake" of opportunities, both for the supplier and for its partner, and not in the struggle for a piece of "small pie", which often acquires the form of the game with a zero result. 5 retailers features a business model:  High operating expenses  Minimum amount of receivables  A relatively high turnover of warehouse stocks  A significant amount of payables  The value of assets is approximately equal to the magnitude of long-term liabilities. An important indicator is the performance of the premises used. As your products are shifted down by buyers' perception scale, you remains to invest money mainly in marketing, stimulating the actions of retailers (Fig. 15). Fig. 15. Compliance between the composition of marketing programs and consumers perceived by consumers. 5 And here without a systemic approach it did not cost. See, for example, system thinking. How to manage chaos and complex processes or art of systemic thinking.

 

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