Post on 14-Jan-2015
description
I want to tell you, why it is dangerousto introduce new business process by «copy-past»
What is Danon?
*local brands within 22 countries
Avian Confectionary*Dairy
In 1995 Danone purchased «Bolshevik»*and launched business optimization
*one of the oldest confectionary Russian plant
Distributor bought refrigerator and cars
Payed salary to exclusive agents
Achieved break-even point within 2-3 years
DS3-model of Danone Dairy was:
With it’s model Danone covered 2-3 cities annually*
* Mind that majority of the cities were already covered with exclusive sales agents
And we started from scratch, and we need high-speed business model
And we need to cover 80 cities within 2 years
And our existing distributors did not want to invest heavily in our exclusive sales agents*
* And we need to return our investment in agents within 2 years
At that time there we the following shared investments in salaries:
50% / 50% One pays the whole
(distributor or supplier)
Fixed and variable (producer pays fix, distributor –variable part of salary, or vice
versa)
But no one model fit us
Because of time to market
Or by managability of agents
Or by return of investment within 2 years
And we started the negotiations
Having a lot of trips across Russia, I developed the model, which suited both
Danone and Distributors
Danone: How much do you pay to your agents?
Agent Salary
3% of total turnover
Agent Salary
Danone: How much do you pay to your agents?
Distributor: 3% of total turnover
Danone: How much do you pay to your agents?
Distributor: 3% of total turnover
Danone: so you can pay to our exclusive sales agent not less than 3% of turnover of Danone
Turnover of Danone
Agent Salary
3% of Danone’s turnover pays Distributor
Distributor: Agreed. But 3% should not cover all the salary!
Turnover of Danone
Agent Salary
?
3% of total turnover pays Distributor
Distributor: Agreed. But 3% should not cover all the salary!
Danone: Danone pays the difference.And we decide about fixed/variable,You job is to pay your 3%
Turnover of Danone
Agent Salary
Danone pays
3% of total turnover pays Distributor
Within 2 years turnover of Danone grew and the 3% covered the whole salary of agent, and we did not invest any more but fully managed exclusive sales agents
3% cover Agent Salary
Turnover of Danone
Agent Salary
Turnover of Danone doubles
Danone
3%
Distributor started to check validity of our agents’s sales, as he payd3% of their turnover.It was double-check of secondary sales
Pleasant discovery
So, we hired exclusive sales agents ….
But there came an obstacle …
It was not profitable for distributor to deliver our orders to shops — it was less than minimum delivery lot
Unprofitable logistik
DS3 DS3mixed
3PD
Focus on sales
Strong Average Weak
Delivery lotSmall Average Big
There was the trick?
Unfortunatelly, mixed team did not always provide profitable logistik
And we obliged agents to add “ballas to the orderзаказу up to minimum lot. As a “ballast” we used«Chaka» peanuts»*
* In every region «Chaka» peanuts» were different products
But I am payed for Danone only
It seemed, that we considered everything …
But … how to manage them
Models, effective for 40 agents, Did not work for 400…
Adaptation, on-boarding, mentoring, work with, recruitment
Annual Personal Development Review
Career ladder, strategik organizational development plan
And we started to set up business processes for our exclusive sales agents:
There is no difference is sales agent on our payroll, or on distributors — when he sales our products exclusivelly, he gets all the benefits of Danone
General Manager, Danone-confectionary
Alexey Mekhanik
As example, our agents on distributors payroll got their fix and var salary on the 3-rd day of the month
And it was not only words, it was strong processes
As a result, in a two years
60.000retail outlets
40%Revenue growth*
400exclusive sales agents
*with the same EBIT in %
Secondary logistik
Investments in salaries
People management
But in your case everything can be different …
We successfully turned around to DS3 due to 3 strategies
And if you plan to introduce new business practice,
Think about your strategy !