Maximising FMCG Distributor Performance: The RtM Excellence Scorecard

INTRODUCTION

Welcome to the 20th edition of my newsletter, 'Route to Market Excellence’ .?

My goal is to share experience and knowledge to help FMCG colleagues?to Skyrocket FMCG Sales, Distribution, and Route to Market Strategy and Execution.

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This 20th Edition is focused on?A World Class Approach to Tracking, Measuring, and Driving FMCG Distributor Partners (DPs).

EMPOWERING FMCG DISTRIBUTOR PARTNERS (DPs)

We have a very specific approach for identifying, assessing, improving, empowering, and driving FMCG DPs, to deliver shared goals.? We call this the Distributor Partner (DP) Development Programme .?

One of the fundamental principles of this approach is collaboration.? Whether its Joint Business Plans (JBP), Joint Action Plans (JAP), joint investment, or jointly agreed targets , if an FMCG Co. (Fast Moving Consumer Goods Company) and a DP, jointly agree on a shared approach, with clear roles and responsibilities, the likelihood of success is far greater than an old top-down approach of “here is the target, you are the distributor, now go and deliver”.

To achieve this collaborative approach, we need a measurement tool with jointly agreed and understood Key Performance Indicators (KPIs) supporting each element of the agreed strategic approach .

The measurement tool we use is the RtM Excellence Scorecard.? This uses inputs from the well-known Kaplan & Norton Balanced Scorecard approach (a strategic management system that translates a company’s vision and strategy into four pillars, with each having a set of objectives, measures, targets, and initiatives that link to the overall strategy), with our own RtM KPIs that have been researched, tested and proven over the last 30 years.

RtM EXCELLENCE SCORECARD PILLARS

Our RtM Excellence Scorecard covers four key strategic pillars which are designed to build towards the shared strategic vision between an FMCG Co. and their DP.?

The four critical pillars are:

1. FINANCIAL PERFORMANCE
2. CUSTOMERS & STAKEHOLDERS
3. RtM EFFICIENCY
4. LEARNING & GOVERNANCE

The FINANCIAL PERFORMANCE results are a consequence of actions previously taken.? The operational measures of CUSTOMERS & STAKEHOLDERS, RtM EFFICIENCY and LEARNING & GOVERNANCE are the critical drivers of future FINANCIAL PERFORMANCE.

Under each of these four critical pillars, we have mapped out our essential proven RtM KPIs, which translate any RtM Strategy into actions and excellence in execution.

RtM EXCELLENCE SCORECARD KPIs

Below we have listed some examples of RtM KPIs that can be used, in each of the four pillars:

1.????? FINANCIAL PERFORMANCE:

• Distributor Cost to Serve (%)

?? Sales Force Cost (%)

?? Supply Chain & Logistic Cost (%)

?? Office & Admin Cost (%)

?? Trading Terms (%)

?? Advertising & Promotion (%)

?? Distributor Net Margin (%)

• Additional Joint Investment:

?? FMCG Co.

?? DP

• Value Share - Total Country

?? By Product Category &/or Brand

• Net Sales - Total Country Revenue Growth

?? By Product Category &/or Brand

• Distributor Sales out - Total Country, by region

?? By Product Category &/or Brand

• Distributor Shipment targets – total and by brand. (this drives profits)
• Credit term from FMCG Co. to Distributor (no. of days)
• Invoices Overdue > X days (value)
• Debt Management / Credit to market – average credit days/receivables
• Value Chain Management – Managing RSP for partner brand vis-à-vis competitor brand
• Trade Spend compliance vs agreed plan, effective and efficient spending by brand

2.????? CUSTOMERS & STAKEHOLDERS

• % Business via Distributor
• Number of Distributors
• % FMCG Co. Share of Total Distributor Business (Strategic Relevance)
• Distributor Sales Force (No. of Head Count)

?? Sales Manager

?? KAM

?? Regional Sales Manager

?? Area Sales Manager

?? Sales Supervisor

?? Sales Rep.& Medical Rep, etc.

• Distributor Logistics (utilisation rate of warehouses, trucks, vans)

?? Number of Warehouses

?? Number of Delivery Trucks

?? Number of Delivery Motorbikes/etc.

• Distributor Coverage (No. of stores), e.g.: penetration % by channel (trend over time)

?? Channels:

?? General Trade (GT)

?? Modern Trade (MT)

?? Pharmacy/Drugstore (DS)

?? Hotels, Restaurants & Café’s (HORECA)

?? Others (e.g., Wholesale, On/Off Trade, Specialist Stores, eCommerce, etc.)

?? Geographies

?? National, Cities, Provinces, etc.

• Customer acquisition in independent channels
• Route Optimisation & Territory Management
• DP resources for Marketing, Trade Marketing, Brand building, Brand Activation, etc.
• Reverse logistics capability (returns, in trade product hygiene management)

?3.????? RtM EFFICIENCY

• Distributor Sales Effectiveness

?? Number of active stores

?? Number of orders

?? Number of SKUs per order

?? New Product Introductions

?? Average Value per order

• Activation

?? Pricing Adherence

?? POS Placement

?? Planogramming / Merchandising

?? Promotional Execution

?? FMCG Co. Asset Management

• Distributor inventory in days (performance vs target stock levels)
• Distributor inventory in value
• Stock aging / FIFO management
• Trade Return rate (% of Net Sales)
• Forecast Accuracy (%)
• Customer Service Level (% DIFOTAI)/ % Delivery in Full, On Time and Accurately Invoiced
• Numeric Distribution

?? By Product Category &/or Brand

• Weighted Distribution

?? By Product Category &/or Brand

• Stock/sales visibility at the Distributor
• Stock/sales visibility at POS

?4.????? LEARNING & GOVERNANCE

• Staff Training Hours
• Brand Workshops / Brand Educational Sessions with the trade
• Employee Turnover / Retention rate
• Relationship Framework

?? Distribution Contracts in Place

?? KPIs jointly agreed

?? KPI Review Dates Scheduled

?? Completed Scheduled Reviews

?? Joint Plans in Place

?? Joint Business Plans

?? Joint Action Plans

• Risk Mitigation

?? Compliance Risk - Does DP meet FMCG Co. requirement of compliance?

?? Quality Risk - Does DP meet FMCG Co. requirement of quality?

?? Finance Risk - Does DP meet FMCG Co. requirement of financial stability test?

?? Reputational Risk – Does the DP carry any historical reputational issues?

• Regulatory Compliance (current environment)
• Local Engagement (potential future environment)

?? Does the DP have Any experience in Government engagement on legislation?

?? Does the DP have the ability and access to local regulators?

?? Can the DP represent the FMCG Co. interests at government level?

RtM EXCELLENCE SCORECARD GUIDANCE

• Not all the KPIs above are relevant to all industries or sectors.? We therefore may need to add in or remove certain KPIs.
• All KPI’s must be agreed upon and fully understood by the DP and the FMCG Co.
• This agreement and understanding must happen at strategic and operational levels.
• What gets measured gets done. But if too much is measured, nothing may get done.
• As a guide, choose four KPIs per pillar.
• The definition and source of data must be agreed upon in advance.
• RtM Excellence Scorecard must be jointly reviewed at an operational level monthly (like the JAP) and at a strategic level quarterly (like the JBP).
• The strategic quarterly review should include a summary of each RtM Excellence Scorecard pillar.
• If possible, it is advisable to automate the data, to reduce human error.? However, the RtM Excellence Scorecard should be kept simple enough to facilitate manual inputs.
• Choose a point in the month that will allow the most up-to-date information, including from multiple sources.
• Depending on the KPI, measurement periods can be ACTUAL vs PLAN, TY (THIS YEAR) vs LY (LAST YEAR), MONTH, YTD (YEAR TO DATE), FY (FULL YEAR), FORECAST, RUNNING RATE, or any combination.
• Wherever we say Distributor Partner (DP) or Distributor, we could replace this with Distribution, to cover direct distribution.? The principles and most of the KPIs are the same.
• For most businesses, KPIs should be measured monthly.

CONCLUSION

The central benefit of the RtM Excellence Scorecard is that it translates a RtM Strategy, into the specific components that must be monitored to deliver that strategy.

It is worth stating again, that delivering the above operational measures of CUSTOMERS & STAKEHOLDERS, RtM EFFICIENCY, and LEARNING & GOVERNANCE will drive future FINANCIAL PERFORMANCE.

This list is already comprehensive, and as we said above, all KPIs are not needed for all situations.? Very often, when we review Scorecards, the FMCG Co. tends to measure more rather than less.? Our advice is to measure only those KPIs that can deliver the maximum amount of comprehension and real-world benefit.

We understand that this is easier said than done, but a call needs to be made on the critical KPIs that must be measured.

What should you do now?

• Unlock 8 Crucial RtM Actions to Win in 2024 .
• Subscribe to my?Newsletter on Route to Market Excellence .
• Subscribe to my?Route to Market Blog Here .
• Take our free?distributor management training course here .
• If you need specific help on RtM Training or any RtM issue, please?reach out to me
• Use our?20 Steps to Route to Market Excellence model ?to guide you on your RtM journey.

• You can use the?Enchange Supply Chain House ?to help with your Supply Chain Transformation.
• As we always say, NOW?is the time to review, build, and/or transform your RtM Strategy and Execution to reap the rewards. Do not wait. Feel free to use our?20 Steps to Route to Market Excellence Implementation Guide ?to help you: