It's a case of discarding excess baggage or just about. Established distribution patterns in fast moving consumer goods companies are slowly giving way to streamlined operations. Marketers are increasingly outsourcing some of the key functions in the distribution and logistics circuit, and looking for a host of reasons to reach the consumer better.
Meet the clearing and forwarding agents (C&F), who most marketing companies say will form a vital ingredient in the future to rev up distribution set ups.
While established multinationals like Hindustan Lever and Colgate Palmolive have been using C&F agents for sometime now, companies like Kodak, Dabur and many more are using that route. Be it for cost cuts, faster response time or just a leaner set up, fast moving consumer goods companies (FMCG) are phasing out their depots and wooing C&F agents in a big way.
Says P S Gopalakrishnan, senior sales manager at Dabur India, "With the cost of establishing depots being extremely prohibitive, C&F agent firms will be the norm in future." Dabur, a highly diversified FMCG company with a turnover of Rs 707 crore is trying out C&F agents in the north.
Shifting over to C&F agents is a trend, predominantly used by pharmaceutical companies. For more than a decade, cost conscious pharma majors have been handing over charge from company stockists to the C&F agent, the second rung in a company's distribution chain.
Like most of their counterparts in other sectors, cost, undoubtedly, is one factor that has driven FMCG companies to alter their distribution strategies. For one, escalating real estate costs and personnel overheads are making depots and branchoffices unviable. These aspects, say company sources pushes cost by 40 to 50 per cent. Outsourcing, they feel is the only answer. "It leaves us with enough resources and time to focus on our business," reveals a marketing manager.
Clearly, for FMCG companies, a growing portfolio of brands has meant that they have to fight for share of space both at the distributor and retailer end. And what better way to service than through a third party? Says Amal Jajodia, vice president, sales, Kodak, "The setting of a depot, particularly in the metros is exorbitant. And most of the up and coming firms find the C&F agents well suited, both in terms of the money they charge and also their superior service."
Kodak, with a turnover of Rs 214.09 crore, has been using the C&F route for some time now. Today, it has 22 C&F agents across the country and just around three depots. It plans to phase out the depots in the near future.
According to Pradeep Kumar, general manager, logistics, Kodak, the trickle effect of phasing out depots is tremendous. "Companies which employ C&F agents have more control over the outsourcing aspect when it comes to distribution," he says. Adds Dabur's Gopalakrishnan, "There is a professional approach involved when it comes to the C&F agents. The high competition amongst them means that C&F agents are constantly trying to outperform each other, which in turn provides better service."
Very often, the C&F agent is an entrepreneur with his own warehousing facilities. To maximise the space in his godowns, he is more prone to rotate stocks effectively and at a greater speed. As Jajodia says, "The service level that today's C&F agent provides is very high."
Response time is another allure which has drawn marketing firms toward C& agents. While earlier a depot was, in general, relatively slack to customer requirements, C&F agents have proved to be the right antidote for the sluggishness. For instance, fewer C&F agents cater to a larger territory covering more distributors. This not only helps them stock a company's entire product stable, but reach the distributor much faster. Like at Dabur, with larger volumes, consignments reach the distributor via the C&F agent within three to four days compared to a week earlier.
Says Kumar, "Response time has definitely improved. Now even if a person calls up the agent from afar, the agent is surely going to ensure that the goods are despatched on time. In fact, laboratories, which use most of our goods, are more than satisfied with the service that the C&F agents offer."
Moreover, the entrepreneur C&F agent is keen on maximising his return on investment. As a result, he is ready to put in long hours. "After six in the evening, it is packup for depots. So even if a customer or dealer calls up, it is usually futile. C&F agents are different. Mostly, the goods are delivered to the dealer when and where he wants it.," explains Gopalakrishnan.
It isn't always that companies chasing volumes will opt for C&F agents. Very often, for a company, it shortens the distance between a far flung manufacturing unit in one state and a distribution centre at the other end. The C&F agent virtually provides an entire infrastructure for the company.
Even so, companies claim that employing a C&F agent isn't always the ideal situation. For one, companies have no direct control over their activities. Moreover, as companies often share C&F agents, the best employer wins. At times, an agent might often favour a company with high volume products, one that offers him greater margins. And then pressure on the C&FAs sharing more than two companies in the closing quarter of a month might also lead to discrepancies in the service.
Kumar adds, "Though a whole lot of marketing firms are going in for C&F agents, there is room for a lot of improvement. Though the agents are professional, they need to equip themselves with more services . It is ultimately a service industry and the more you innovate the more they stand to gain."
For many FMCG companies, this is only the first step. And as C&F agents find themselves invariably drawn into the distribution set up, the onus is on them to transport their services to another plane altogether. One that will see them occupy a more substantial place in the distribution set ups of tomorrow.
