Sales teams are primarily concerned with doing their budgeted targets for today and refuse to see more than year into future and that is also stretching it. They blame the distributor for non-adherence to sop’s, blame the top management for confusing priorities, and project obstacles (mostly concerned with other departments) to show how their environment is different and refuse to accept that it’s in their hands to change current market realities. People in sales are the most obstinate lot of mankind and it is very difficult to get things implemented in sales. This is the primary belief that most companies hold about the sales function, and is one with quite a bit of truth in it too.
Theory of Constraints based solution for sales is almost diagonally opposite from some of the current popular idioms of sales teams handling trade channels. And hence it behoves a thorough understanding of the sales team’s current realities to decide how to do the implementation of the injections.
The necessary assumption of the offer made to trade channel is that when most cash is tied up in inventory – offering higher Inventory turns is a decisive competitive edge (DCE). But when you discuss with distributors and distribution companies, credit outstanding and over dues in the market seem to be a bigger worry: where at least 50% of the cash at least is tied up and the perceived risk is higher. But in fact credit outstanding is a manifestation of the inventory holding of the receiving location.. It’s a function of
1. Pull the company’s product has in the market
2. Number of Purchase sources the retailer has and
3. The rate at which the retailer is turning around stock
Theory of Constraints prescribes rapid replenishment to tackle availability, clubbed along with BTL / merchandising / influencer programmes to create pull and in the process ensuring better stock turns to distributor and retailer. But companies have to align network and business policies to one source per retailer for the overall distributor ROI to increase substantially otherwise the replenishment logic fails as the retailer can divide his capital requirement among the various sources.
Usual obstacles in implementing one source per retailer that we face is lack of policy or an understanding across hierarchies within the company that an exclusive geography for distributors is a necessary condition and all barriers towards that should be removed. Obstacles are the perceived risks on immediate sales when the transition is to be made. Major transition steps are –
1. Choosing one direct account over another for a firm that is planning a transition from retailers as direct accounts to a distribution led network.
2. Cutting down the business policy of doling out substantial (anything more than 2-3%) value or volume based discounts will hamper the relationship with bigger dealers. This enabled traders to become loss leaders in the market and infringe across territories
Would we able to surface all such obstacles in the initial study that we do? No, hence the key is to get a team across hierarchies from the sale team and get their buy in on the necessary conditions of the offer. Obstacles will surface and based on their ability to play spoilsport we should facilitate further injections at the offer design stage.
The necessary conditions of the offer are
1. Replenish to norms / make available product within customer tolerance time
2. Retail beat at a frequency half than current (preferably weekly)
3. Give smaller lots at a time to retailer.
4. Replace items not sold in some duration.to distributor
5. Price parity to retail from different channels
6. One source per retailer
7. Sufficient turnover potential for the given geography of the distributor.
The key is to understand that the offer design should be done by the company’s own team and we play the role of the facilitator. There is very thin line between facilitating and actually doing it, that we usually compromise for speed of the rollout. Not to fall for this trap is the Damocles sword of the any of our implementation. *
The offer design is complete only if the magnitude and timeline of how the injections will pan out is tabulated to a certain degree along with the offer by the team. Usual gaps in arriving at this can be finding out
1. How many retailers can be added to the active set
2. How much sale is expected out of the added retailers and products
3. What impact could any of the change in policies have on existing sales etc.
“If we know how to rollout in operations then why should we be wary about this compromise on facilitator role in sales? Primarily because the actions in sales happens across varied geographies and we necessarily can’t be present to identify gaps in implementation on a daily basis and coach the line manager to course correct. And since there are third parties (retailers and distributors) involved, reversing the damage would also take time putting at risk the speed of the implementation. Sales management in many clients after the primary selling point is not a process driven activity as other functions of the client would be and hence the paradigm shift is right at the base of the mental pyramid. Hence the major implementation tactics and the need for them should be clear to the company personnel from top management to the champions of the process. And if we do the implementation actions the management would never get clarity on the obstacles, which are coming, and the way to tackle it. Hence we should drive the entire activity through the client top team and drive them to train the feet on the ground continuously.
A slightly laborious data crunching and in many cases market mapping of an area might be called for the same. Understanding the quantum of the expected result also acts as a counter measure to some gaps in implementation that we do –
1. Over time in the implementation we become aware that we are the only ones who doesn’t speak the language of sales number and for us to effectively communicate to the client we should address that need.by linking the enablers to the final result.
2. It gives indubitable clarity to client on the impact of the in rollout over time and might lead to client putting more resources for a faster implementation.
3. Acts as a check whether we are choosing the right channel (Modern Trade, Retail, Service, Company Owned Outlets, Exclusive Branded Outlet), geography and customer to target our offer first to.
4. It also checks whether we are choosing the right geography to do the initial implementation esp in firms where the channel structure is being changed from direct accounts to distributors.
For a company that is dealing directly with retailer or traders currently, picking the tier II or tier III cities and corresponding districts to start with is ideal where choosing a distributor is going to be less risky for hampering the current sales. Such implementations can move to bigger cities when the solution and methodology is well established. For a client where only a minimal rearrangement of the current network is foreseen-no such filtering is required.
Do we needs to be aware of any other criteria? Sales team can be prejudiced against going for current set of dealers or distributors but it makes sense to give first right of refusal to the existing set before looking out for new entities. For the simple reason that with a new distributor we add a learning curve of the product and other current business practices of the client and that adds to timeline for impact. What are the criteria for selection of distributor –apart from his financial and infrastructural capability to manage the territory in questions, the key is to understand how involved is the distributor owner in the daily management of the business and whether he is pliable to new ideas & processes: something which the sales team can usually vouch for. But it’s necessary to check the same especially in the first phase of the rollout or the pilot.
Once the target is identified and the offers are ready arrives the time to plan the rollout. The first query in the implementation of the offer is how is the replenishment to be effected? The ideal system is to have billing software, which marries with the client ERP system. Why not use Excel spreadsheets for the same? Collection of data becomes another exercise for the sales team/distributor and there is less validity of the data being captured than the actual billing data. At this point it would be pertinent to say that any system delivers what its users want it to deliver.
A full-blown pilot is to be done if there is doubt in client’s mind on the causality of the solution. If the offer and projected plan is made internally by a team of the client whom the top management believes in, I presume the need for a pilot will be eliminated and we can start with the first phase of the rollout.
So do we stick to my opening of whether the sale team is the most obstinate of the lot – pl wait for further musings on the implementation of the offer to distributor & retailer replenishment offer and active task management of the process after the rollout to conclude on the same.