November 8, 2012

Distribution Strategy for the MSMEs


Several Small & Medium Enterprises [MSME] go through the pain of trying to set up a distribution network and most seem to set it up by trail & error method than in a planned manner.  So you have seen many flourishing & established businesses in north India that have been struggling to strategise their distribution  network to match the sales objectives, financial strategy and the production capacity. Many firms find it impossible to balance sales force’s strengths & weaknesses to the cumbersome traditional system that it has got saddled with. 

For consumer facing business it’s extremely critical to leverage the distribution network in order to stay competitive for a medium to long term. The myth of financial leverage associated with existing trade channels has long been dispelled by many players across India. Just having a good product, an attractive trade policy and transport network is no longer enough. You need to have great packaging, trained sales force, marketing support and strategic & tactical plan to get your share of the market. You need to benchmark  certain percent of repeat sales from your market otherwise you may look like those primary agriculturists who used to burn the jungles and cultivate it once and then move on to the new pastures. 

You must ask yourself how much repeat sales are you getting from your served markets and which direction you are headed? Generally we start thinking about marketing & sales after manufacturing has been taken care of.  Recently I came across a firm from ludhiana, Punjab that faced classical dilemma. The CEO wanted a sales & Marketing network that could handle higher volumes, whereas the Sales & Marketing Head would blame bad production planning for poor sales. The conflict between production & marketing is normal until the organization is not riddled with inventories.

Having no inventories or moving all your production could not be the aim of a good CEO/CMO, you must strive to get the max share of market on a given day & plan for that. If you are happy with moving everything you make then you are complacent about the competition just eating away your share. That in turn would lead to fierce competition in future.

It’s wise to plan marketing well in advance & test the network before you get into real battle. Integrate all nodes of supply chain into one whole with help of readily available solutions. Must look for contract manufacturing and concentrate on brand building and supply chain. There are many suppliers for manufacturing operations available but hardly any for managing the distribution in a manner that amy suit your growth plan.

Start up companies must negotiate the trap of creating a corporate brand in comparison to product brand. A product brand is easier to market than communicate the umbrella brand. I have observed many SMEs trying to do a corporate brand. Most ludhiana based hosiery & apparels companies suffer from this problem they spread their brand too thin. They thought they were emulating a Nike or Adidas without understanding the nature of those companies. Its necessary to have a well oiled distribution network served by a motivated sales & marketing team to match the competition in the growing India.

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