咨询管理战略组织项目麦肯锡工具评估 revised henkel.ppt

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1、-1-Roland Berger&Partners International Management ConsultantsBarcelona Beijing Berlin Brussels Bucharest Budapest Buenos Aires Detroit Dsseldorf Frankfurt Hamburg Kiev LisbonLondon Madrid Milan Moscow Munich New York Paris Prague Riga Rome So Paulo Shanghai Stuttgart Tokyo Vienna ZurichLogistic opt

2、imization to support rural penetration Issue paper Peiking,June,2000SHA-4301-200099-02-16-a-x-2-This document was created for the exclusive use of our clients.It is not complete unless supported by the underlying detailed analyses and oral presentation.It must not be passed on to third parties excep

3、t with the explicit prior consent of Roland Berger&Partners.Content PageA.Logistics optimization is critical for rural market penetration 3B.Adjusting logistic system to satisfy present rural sales&distribution network and its development?C.Reducing logistic cost to gain competitive advantage?D.What

4、 Roland Berger can do for Henkel?E.Selected reference?SHA-4301-200099-02-16-a-x-3-A.Logistics optimization is critical for rural market penetrationSHA-4301-200099-02-16-a-x-4-After rapid increase in early 1990s,annual growth of China detergent market has slowed down in these yearsNational market siz

5、e of laundry detergentin Mio.tons199319941995199619972000*EstimationSource:Chinese light Industry Yearbook,Roland Berger&Partners analysis1.92.22.82.62.72.93.0+8.2%p.a.23%p.a.SHA-4301-200099-02-16-a-x-5-While rural detergent market still has great potential to exploitAbout 70%of total population loc

6、ates in rural areaWhile per capita consumption of detergent in rural is lowRuralCitySource:AC Nielsen retailing audit 1999-2000Potential in rural area is highIn remote west&north rural areas detergent has not been very popular because it is new to local peopleIn some area,like Shandong,rural people

7、used to use detergent paste,which is cheaper,to substitute detergent powderAnd in Zhejiang,rural people also used to use laundry soap as an alternativeBut with the popularity of washing machine and increase of rural peoples annual income,substitutes will be washed out and detergent powder will be mo

8、re popularSHA-4301-200099-02-16-a-x-6-Also,opportunity in rural is bigger than that in cityMarket share of top five brands in city&townAnalysisIn city,high end market has been dominated by TIDE,and middle end by Whitecat and Libai,and low end by Qiqiang.The competition structure has been formed and

9、leaves less opportunity for challengerIn rural,only Qiqiang is the strongest brand,but other strong brands,like Libai and Whitecat,have not established a strong market bases.So it is easier for an aggressive brand to gain market share for there is expanding market and opportunities CityTownOthersJia

10、meiTIDELibaiWhitecatQiqiangOthersJiameiDiaoPaiLibaiWhitecatQiqiangSource:AC Nielsen retailing audit 1999-2000SHA-4301-200099-02-16-a-x-7-In order to boost rural sales,company need a powerful logistic system to deepen rural distribution Qiqiangs logistic system Qiqiangs performance in city&town(Feb-M

11、ar.2000)City market shareTown market shareCity weightedTown distribution indexSeven production sits in ChinaDirect deliverySurrounding sales branches in countyWholesalers and retailersRural consumerDirect deliveryExampleSource:AC Nielsen retailing audit 1999-2000SHA-4301-200099-02-16-a-x-8-Fierce co

12、mpetition leads to price reduction and thus reduces the product profitability Gross profitability of Whitecat regular powderPrice reduction of Major brand(RMB/Kg)11%1998年年 1999年年3%TideOMO18.016.516.412.35.54.8Whitecat(regular powder)1998年1999年Average price reduction of the whole industry is 10%Sourc

13、e:AC Nielsen retailing audit 1999-2000SHA-4301-200099-02-16-a-x-9-In order to keep competitive price in rural and business profitability,company should also reduce logistic cost to minimum levelExample:Cost structure(A leading detergent company in China)AnalysisLogistic cost is very sensitive for de

14、tergent manufacturer because it accounts for over 10%of total costGenerally it is easier to cut logistic cost than manufacturing or material costTransportation and warehousing cost is the major costs in logistic and can be reduced through redesign physical network,process and improvement of transpor

15、tation and warehousing But cost reduction should not be realized at the cost of impairing necessary logistic capacity for rural penetrationLogisticMaterialManufacturingTransportationOperation expenseHandling cost and insuranceWarehousingSource:Roland Berger interviewSHA-4301-200099-02-16-a-x-10-Logi

16、stic optimization is critical for rural penetration through sales increase and cost reduction Reducing inventory&warehousing costReducing transportation costShortening lead timeReducing operational cash flowReducing scrapping and breakageBenefit of logistic optimizationCost reductionSalesincreaseRed

17、ucing of out-of-stockStrengthening deep distribution coverageIncrease the speed to marketRetaining customers through increase of customer satisfactionReducing supply errorsSHA-4301-200099-02-16-a-x-11-B.Adjusting logistic system to satisfy present rural sales&distribution network and its development

18、SHA-4301-200099-02-16-a-x-12-Rural distribution channel has four-tiers,each with its different characteristicsIn county,retailers are mostly medium general store department store and kiosk who get product either from distributors in city or from nearby wholesaler.Sometimes,there is a wholesaling mar

19、ket consisting of lots of wholesalersIn town,retailer are mostly grocery,kiosk and small general store/department store,they got product from wholesaler in the county or nearby wholesaling&retailing dealersIn rural area,retailers are mostly small private-owned grocery with two to three detergent bra

20、nds in each store.While Bazaar which is organized every ten days also supply detergent with lower price.Both of them get products mainly form wholesaling and retailing dealer in townRural consumer has three channels to buy detergent.They may buy it in nearby grocery,or in bazaar every ten days or ev

21、en buy from wholesaling&retailing dealerSome aggressive companies to delivery products directly to wholesaler retailers in county and town level or even to bazaarDistributorCompanys branchRetailerWholesalerWholesaling&retailing dealerRetailerRetailerBazaarRural consumerPerpecture-levelcounty-levelTo

22、wn-levelVillage-levelRural areaDistribution structure in rural areaSHA-4301-200099-02-16-a-x-13-Consolidation of distributors will reduce number of direct shipmentReduction of number of direct shipmentIn east China,distributor consolidation has nearly finished,some big distributors have been in domi

23、nant pisitionsWith the internal competition among distributors,less qualified distributors will be washedd outP&G has fasten the consolidation process,by eliminating less qualified distributors,its first level distributors has been reduced to around 400In west China,distributor consolidation is on i

24、ts waySHA-4301-200099-02-16-a-x-14-Wholesaling market in county level is becoming the major scenario where companies and distributors competed,so company should put their distribution focus down on county levelWholesaling market in county level is the major hinge of rural penetrationCompanies and di

25、stributors begin to compete in wholesaling market in county levelIn past years,focus of company are distributors in perpecture,depending on natural penetration to cover wholesaling market in countyBut now,because of its hinge position in rural market penetration,companies begin to penetrate the whol

26、esaling market either directly or jointlyP&G requires its distributors to set secondary distributors in county,and assign special team to expand the distribution coverage in county level wholesaling marketQiqiang directly set its branches in county or even in wholesaling marketWholesaling and retail

27、ing dealer in townRetailers in townCompanyDistributors in perspectiveRetailers in countyWholesaling market in county20%80%20%20%60%The position in county level wholesaling market greatly determined the performance in rural marketSource:Roland Berger interviewSHA-4301-200099-02-16-a-x-15-MeansDescrip

28、tionDirect shipment to distributors in perpectureManufacture is required to deliver products actively to country level either by it own or through leveraging distributors forceSource:Roland Berger&Partners interviewTrainBoatTruckLeveraging distributor to deliver products to county wholesaling market

29、 through offering free truckTo acquire new customer which is not accessible by distributor,local branch can deliver by its ownTruckManufactureDistributorWholesaling marketWholesaler&retailer dealer and retailerRetailer&bazaarCustomerPerpcetureCountyActive deliveryActive deliveryActive deliveryTownVi

30、llageNot economic to expand logistic system down to town levelBut sometimes,manufacturer can be directly deliver to bazaar,either by its own or through cooperation with distributorRaise of transportation cost and truck investment is necessary for rural penetrationSHA-4301-200099-02-16-a-x-16-Immigra

31、tion of residents from village to town and county requires company to actively raise the distribution coverage of retailers in county and townTrendReaction by companyIn order to gain more income,more and more young residents in village have gone to town and county to get jobs and the trend will go o

32、n in next few yearsWithin the immigrating process,higher purchasing power from young residents has transfer to town and county,thus drive the potential of detergent consumption in county and townTherefore,retailers in town and county is becoming more and more importantIn past,company and distributor

33、s just focus on the wholesalers market in county and town,depending on natural penetration to cover retailers and the transportation is undertaken by retailersRealizing the importance of retailers in county&town,company now actively exploit the retailers either through cooperation with distributors/

34、wholesaler or selling directly,and the transportation is taken by company or distributorQiqiang is a typical example of active penetration of retailer segment.The sales force call on most of local retailers and send products direct to them,this method has greatly contributed to the success of Qiqian

35、g in rural penetrationSHA-4301-200099-02-16-a-x-17-Distributors logistics capability should be raise to gain deep distribution in county&town level retailers The distributors own sufficient warehousing and delivery capacity to meet the growing business needsA sustainable and standardized distributor

36、 logistics process support rural sellingConsistent standard on customer service An optimal operation cost and service speedFuture ideal stateLack of delivery capacityOnly sell by the doorUnable to fulfill rural customer needsCurrent distributor logistics modelOwn vehicles for rural sellingOwn vehicl

37、es for delivery onlyRent vehicles for deliveryPhysical investment in distributor logistics.E.g.purchase vans,trucks for distributors,Libai,LonkeyProvide coach on logistics process optimisation,P&GLack of delivery capacity at the peak timeWithout the capability of on-road sellingThe advanced logistic

38、s modelLack of systematic working processUnable to provide a consistent,standard customer serviceSHA-4301-200099-02-16-a-x-18-Van selling has been adopted as a practice by some of leading detergent companies such as P&G,Nanfeng,LiBai,LonkeyFast replenishment Vivid selling effectivenessCool,without c

39、ollection riskEnlarge the fellitory of rural coverageEasy stoart-up/in terms of operationOptimal costomer service Strongthen partnership with distributorsFixed asset investment at the start-upThe on-going distributor logistics operation costLack of a systematic work processPoor profit margin due to

40、price transparenceSelling will be impacted by weather conditionChallengeStrengthSHA-4301-200099-02-16-a-x-19-C.Reducing logistic cost to gain competitive advantageSHA-4301-200099-02-16-a-x-20-Insert logsitic cost reduction potentialSHA-4301-200099-02-16-a-x-21-Cost reduction can be achieved through

41、redesigning physical network,streamlining process and improving warehousing&transportationRedesigning physical networkStreamlining process Improving warehousing&transportationNo.of production site and locationNo.and location of Regional Distribution centerNo.of shipment pointssupply chain integratio

42、nDirect deliveryJITIDSIntroducing advanced warehousing practiceOutsourcingTransportation model optimizationSHA-4301-200099-02-16-a-x-22-Setting manufacturing sites in major strategic areas will contribute to deep distribution and lower transportation cost at the expense of increased manufacturing co

43、stLocation of production sites of QiqiangAnalysisNeimengBenxiShanxiXianSichuanGuizhouAnhui*:Libai reach local production through OEM to reduce manufacturing cost and initial investment,but the quality of products and reliability of supply is problematicAcquiring manufacture sites in major strategic

44、area*Local production&local distributionFast reaction to local demandShort lead timeShort-term transportation and low transportation costIncrease of manufacturing costApproachProsConsManufacturing&distribution detergent in one brandSuitabilitySHA-4301-200099-02-16-a-x-23-Reducing production sites an

45、d establishing regional distribution center will reduce manufacturing cost,but its transportation cost will rise accordinglyP&G logistic operationAnalysisReducing manufacturing sites(P&G has slashed its manufacturing site from 7 to 3)Establishing RDCLower down manufacturing costKeep efficient logist

46、ic operationIncrease of transportation cost because of long-distance transportationApproachProsConsMulti-brand or multi-product logistic operation SuitabilityThree manufacturing sits in ChinaFive regional distribution centresDistributors in over 500 citiesOver 1 million outletsSHA-4301-200099-02-16-

47、a-x-24-Consolidation of separate logistic systems will also contribute to the logistic cost reductionUnilever has consolidated its logistic system to avoid problems from separated logistic systemMore warehouseMore transportationUndermining the ability to negotiate with the third party logistic provi

48、derScattered logistic resource can not support deep distributionHard to gain distributors support for deep distributionJV1JV2JV3Various Distribution Channel 2)ConsumersJoint Sales Companys RDCMajor Wholesaler Chain/ClubMajor RetailersRetailersSHA-4301-200099-02-16-a-x-25-To streamlining process requ

49、ires adoption of advanced logistic practice and IT investmentAdvanced logistic practiceConsolidation of supply chainDirect shippingJIT SupplyIDSApproachEffectStreamline process through the entire detached level of supply chain from order processing to deliveryInventory reduction Short lead timeFinis

50、hed products are delivered directly from production line to RDC through truckReduction of warehousing costFast cash flowShort lead timeProduction and supply to orderReduction of inventory&warehousing cost Short lead timeInvestment in IT development to link customer to manufacturerFast data exchange