Why Indian FMCG Companies Shy From Enforcing DMS

If you have been exposed to the Indian FMCG sales and distribution ecosystem, there are high chances that you would have heard the rhetoric

Indian FMCG distributors are not willing to adopt a DMS enforced by the brand, because they typically work with multiple mid-sized brands and maintaining data for each brand becomes tedious and impractical

FMCG in India is a mature industry and until a few years ago each product category was dominated by handful of players who used to enjoy healthy market share (either regional or national) and the focus was on manufacturing sufficient quantities and feeding the supply chain (super stockists, distributors and wholesalers) who were happy to distribute the goods till the retail stores in their neighbouring clusters. In such a market scenario, no entity in the supply chain had the motivation or need to maintain a computer system to manage inventory or sales because expectations from the brand were minimal, quantities were in bulk, return on investment was decent, and calculations were relatively simple. This began to change somewhere around start of the last decade (early 2010), picked up momentum due to the changes in regulatory framework (FSSAI, GST, Digital and Startup India campaigns etc), stiff competition traditional retail faced from Modern trade and eCommerce, and today i.e. 2021, FMCG sales and distribution is a different ball game altogether, highly dependent on systems and processes, especially for tier-1 and tier-2 brands.

Peri’s leadership team has been observing this shift since 2015 when they picked up a turnkey project to augment sales for a regional biscuit brand. During their extensive interactions with sales leaders (national, zonal and regional sales heads) and pan-India field visits, the rhetoric was consistent that distributors are either not skilled (in terms of tech knowhow or computer availability) or willed (in terms of taking on ownership and entering data on a regular basis) to implement a DMS that the company is sponsoring. It’s been 6 years and today when Peri is offering and implementing a fully equipped DMS with comprehensive, easy-to-use features, the statement of most sales leaders remains the same, although the rigidity has gone down.

In this blog, we will highlight the top reasons why Indian FMCG companies shy away from implementing a robust DMS across their supply chain.

(to know more about DMS refer our previous blog DMS – The Missing Tech Piece in the Indian FMCG Puzzle)

How many sales leaders or project managers have you met who can claim that they implemented a DMS across company’s supply chain, in a controlled turnkey way and failed?

In our mind, the root cause of the above gap lies in the prevalent management culture of many Indian FMCG companies especially the ones still owned or controlled by families. Firstly, DMS is still seen as a far-fetched dream in the mind of CXO’s, also because it doesn’t directly impact the top-line of the company. Second, automation is not a specialised role in these companies. Technology heads are either old school themselves or stretched too thin on business-as-usual to own a turnkey initiative. Thirdly, sales leaders are not encouraged or incentivised enough to make them risk their track record (or career) by volunteering for such initiatives. Even when their KRA’s include automation, it is mostly for quarterly updates with no interim, dedicated project steering committee meetings. Lastly, when a leader gathers the courage to own a project, he often lacks cross-functional support (HR, Marketing, Supply chain) to pull off a successful rollout.

How often you have seen sales leaders hand-off DMS initiatives to someone who is under utilised (typically a middle manager sitting out of the head office) or a MIS resource not skilled at leading turnkey automation projects?

In our mind, the root-cause of the above gap lies in the prevalent human resource management culture in many Indian FMCG companies. Employees are still evaluated by their defined job role rather than their skills. There is too much emphasis on performing the current job role, rather than making a progression plan which is beneficial for the entire organisational hierarchy. High stakes & high responsibility initiatives are often pushed downline with the premise that someone on-the-ground will do a better job.

And how often have you seen middle managers hand-off the execution of such projects to their downline making the entire initiative a “Chinese whisper” where the vision and communication of the sales leader never gets translated to the suppliers who then are bound to take it less seriously?

In our mind, the root-cause of the above gap is due to the absence of top-down culture and project management best-practices in many Indian FMCG companies. Middle managers are not groomed to lead initiatives, infact they have internalised handing-off execution to the next available employee in their team because that’s what they have seen leaders doing. The lack of a command centre means that a project’s goals are open for interpretation and twisting. To make matters worse, there is hardly any documentation around turnkey projects – no project charter,  no project plan, scattered disoriented resources, no minutes of meeting and no steering committee to intervene when things aren’t going as planned. And when this happens once or twice, the biggest downside is company’s partners (including employees, vendors, customers) lose trust and belief in the vision and benefits of projects like a DMS rollout.

As a country, India is moving up the automation curve pretty fast. The government of India is busy shifting manual processes to technology with the overall aim of creating transparency and accountability. FMCG is a sector of great interest for both Indian and international stakeholders. Which means over the next 5 years, the industry will go through major shifts with technology at the centre of it. Supply chain automation (including logistics, inventory, distribution and shelf automation) will come into play and can prove to be a competitive advantage for the early movers. If you are a FMCG manufacturer with 100+ supply chain partners (stockiest, distributors or sub distributors), we recommend you to evaluate a Distribution management system (DMS) at the earliest and plan a phase-wise implementation in the current financial year. While evaluating, we strongly suggest to keep these adoption factors in mind which are also the pillars of Peri’s DMS:

1. DMS activation must take 10 minutes or less
2. 100% accurate Primary sales should be readily available
3. Retail universe of the distributor should be readily available
4. Distributor should feel empowered – that he can now control his and company’s salesmen
5. Inventory reconciliation at first month-end should be strictly enforced
6. Secondary order should flow to distributor real-time
7. Fulfilment of secondary order should be super easy and user-friendly
8. GST Sales document should get generated from DMS compatible with top ERP’s (the likes of Tally, Busy, and Marg)
9. All company reimbursements to distributor must be routed through the DMS.

As an automation partner to Indian FMCG companies, Peri CRM wants to increase the penetration of DMS not just across tier-1 and tier-2 brands or suppliers in bigger cities but for each and every FMCG brand who wishes to strength its supply chain by gaining transparency, better control and real-time data with insights for taking preventive and reactive measures. Give us a call and take a demo of Peri CRM’s newly launched and highly user-friendly DMS.