Providing decision support to FMCG market players in developing economies

Kriel, Janti (2016)

Thesis (MEng)--Stellenbosch University, 2016.

Thesis

ENGLISH ABSTRACT: Resulting from a drop in commodity prices, foreign investment has largely been diverted to the consumer goods and services market in Africa. The aggressive expansion of ill-prepared companies into relatively unknown markets has led to gross ine ciencies reducing overall competitiveness and consumer satisfaction. The research was undertaken in response to the downstream distribution di culties faced by the fast moving consumer goods industry. The issues at hand stemmed from a lack of easily obtainable information on retail markets within developing economies. The focus of the research became the primary and secondary distribution activities of incumbent and prospecting companies. Specifically, the research sought to improve the identification of business opportunities, improve distribution channel identification and identify best-suited transportation arrangements. Alarmingly over half the price paid by the consumer is spent getting the product to market. Thus as an initial attempt at elevating the competitiveness of market players, downstream distribution presented a logical kick o point. The rst objective was to overcome the barriers to information collection in developing countries. In order to propose and trial an information collection tool, the research partnered with a consultancy called Hunting Dragons Consulting. The research then became part of a larger project undertaken in the Democratic Republic of the Congo. The project was initiated by investors to assess the viability of a business manufacturing and distributing four liquid streams namely beer, opaque beer, soft drinks and spirits in the Katanga province. Through a door-to-door retail outlet survey, information on 168 unique products was collected from 2 081 retail outlets in and around the city of Lubumbashi. Information regarding product mixes, prices, sales volumes, stock and basic supply chain performance indicators allowed the research to reach a number of conclusions. By extrapolating the weekly sales volumes from the sample, the research concluded that 1,34 million hl of beer, 715 000 hl of soft drinks, 462 000 hl of opaque beer and 56 000 hl of spirits is sold annually in the three major towns of the Katanga province. As a result of stock outs and the subsequent missed sales opportunities, annual sales gures could be 48% higher for beer, 33% for soft drinks and 9% for spirits. The research identi ed superior distribution channels by which the additional volumes could be unlocked. For each of the four liquid streams di erent market segments were identi ed as key channel members. The analysis of the current routes to market employed by incumbent companies hinted towards best-suited transportation arrangements. However, the client input was sorely missing from the decision process. Thus the research sought to pragmatically incorporate client inputs into identifying a best-suited transportation arrangement. The developed decision support tool is able to distinguish an own eet, owner driver, crowdsourced, third party logistics, fourth party logistics and distributor arrangements from one another based on two client assessments. From a strategic alignment and compatibility assessment, the tool ranks the six arrangements from best suited to worst suited. The tool was found to produce robust and consistent outputs based on six scenario tests and one case study.

AFRIKAANSE OPSOMMING: As gevolg van 'n daling in kommoditeitspryse, het buitelandse beleggers hulle fokus in Afrika na die verbruikers goedere en dienste mark geskuif. Die aggressiewe uitbreiding van maatskappye in onbekende markte, gekoppel met swak voorbereiding lei tot ondoeltre ende ondernemings en swak verbruikers tevredenheid. Die kwessies byderhand het ontstaan uit 'n gebrek aan verkrygbare inligting oor kleinhandel markte in ontwikkelende ekonomieë. Die navorsing fokus op die primêre en sekondêre verspreidings aktiwiteite van beide gestigte en voornemende maatskappye. Die doel is om die identi sering van sakegeleenthede te verbeter as ook beste geskikte verspreidings kanale en vervoer verska ers te identi seer. Kommerwekkend word meer as helfte van die prys van produkte bestee aan die verspreiding daarvan. Dus sien die navorsing die verspreidings aktiwiteite van maatskappye as 'n logiese afskop punt om hul mededingendheid te verbeter. Die eerste doel was om die struikelblokke tot inligting versameling te oorkom. Die navorsing het 'n vennootskap gestig met 'n groep konsultante genaamd Hunting Dragons Consulting. Dit het toegelaat dat die navorsing 'n data versamelings instrument voorstel en toets. Die navorsing het deel geword van 'n groter projek in die Demokratiese Republiek van die Kongo. Beleggers wou bepaal of 'n daar 'n geleentheid in die Katanga provinsie is om bier, gaskoeldrank, drank en Bantu bier te vervaardig en versprei. Deur middel van 'n deur tot deur opname het die navorsing inligting oor 168 produkte vanaf 2 081 kleinhandelaars ingesamel. Die opname het inligting oor die voorsienings ketting, produkte op rakke, pryse, volumes en voorraad ingesamel. Deur slim manipulering van die data kon dit bepaal word dat 1,34 miljoen hl bier, 715 000 hl gaskoeldrank, 462 000 hl Bantu bier en 56 000 hl drank jaarliks in die drie groot dorpe van die provinsie verkoop. As gevolg van probleme met voorraad is verkoopsyfers drasties laer as verwag. Daar was geskat dat aanvraag soveel as 48% vir bier, 33% vir gaskoeldrank en 9% vir drank hoër is as die toevoer. Verder het die navorsing verspreidingskanale identi seer wat die toevoer van produkte sal verbeter. Vir elk van die vier produk groepe is die belangrikste skakels in die voorsienings ketting geïdenti seer. Dus is die navorsing in staat om pogings tot verhoogte mededingendheid te fokus. Die volgende doel was om 'n instrument te ontwikkel wat 'n bes geskikte vervoer verska er kan voorstel gebaseer op insette van die kliënt. Op grond van twee kliënte aanslae rangskik die instrument ses verska ers modelle genaamd 'n eie vloot, eienaar en bestuurder, skare bron, derde party logistiek, vierde party logistiek en 'n klassieke verspreider. Die kliënt vul 'n strategiese belyning en verenigbaarheid assessering in, wat die nale rangskikking van die ses verska ers bepaal. Na een gevallestudie en ses scenario toetse was dit bepaal dat die instrument beide robuuste en konsekwent uitsette lewer. Die uitsette is dus in staat om die onsekerheid rondom bestuur besluite te verminder.

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