"Non-competing companies can join hands to bring down costs"

Sunil Duggal, CEO, Dabur India, on ways to control distribution costs

Vishal Koul

Optimise field resources: Field resources account for a big chunk of total costs in distribution. Deploy market-interfacing resources on the basis of channel needs and servicing complexities. Incentive structures should be linked to results as this will ensure greater efficiency while utilising the same resource and thereby bring down relative cost.

Improve process quality: Automation of the order-booking process of stockists can result in faster and error-free processing. Technology can be a great enabler — at Dabur, this has given us real-time data visibility on orders and helped us optimise the type and size of vehicles to be deployed at the depots. 

Adopt a hub-and-spoke model: Reduce the replenishment cycle for orders to lower excess inventories. This will mean a significant drop in godown space required, which can mean huge gains. A hub-and-spoke model in the supply chain network and increased frequency of despatches can also help stockists reduce warehouse space.

Negotiate better terms: Companies have been using their clout with financial institutions to ensure their stockists get better terms that bring down their financing costs. With the advent of facilities such as real-time gross settlement, which enables instant credit into the account, despatches can now be made on the same day, significantly reducing time and costs.

Optimise physical distribution: With a business configured under company-provided transaction systems, information on market delivery requirements can be made available dynamically. As a result, stockists can reduce delivery costs by choosing the appropriate delivery vehicle, considering the load factor. Ideally, non-competing companies can also join hands to combine deliveries to bring down the costs at the aggregate level.