Mondelez tweaks supply chain by embracing tech to power key functions

The chocolate maker is embracing technology to power key functions such as distribution, retail and sales, besides leveraging tech solutions to reduce inventory levels

Mondelez India, a multinational present in the country for seven decades, is ramping up its technology infrastructure to lay a strong foundation for accelerated growth over the next few years. For Mondelez, India continues to be a key market. The company posted 27 per cent growth in revenue in the fourth quarter of the 2017 calendar over the same period in the previous year. Though this growth was on a low base of last year which was impacted by demonetisation, for the year as a whole the Indian unit witnessed double digit growth (12 per cent).

Mondelez India is embracing technology to power key functions such as distribution, retail and sales.

To begin with, the chocolate maker is revisiting its approach to set up the company’s distribution system. Traditionally, it had been picking villages (markets) with high population and appointing distributors. 

Then it would map the clusters based on market potential, assessing whether a village has the population or income to support sales. Now, while assessing markets, Mondelez India takes into consideration an additional factor of the accessibility of the markets assisted by geo-mapping solutions.

The company has set a target of reaching every village with a population of 5,000 by 2018. It has added 150,000 outlets in the last 18-20 months taking the total to 2.6 million.

“It is always a challenge to decide what the right markets to go to are. Geo-mapping solutions provide a lot more information around the kind of habitat a village has—is it a cultivation belt or dominated by independent dwelling units, local shops etc.? Access to such details help make more informed choices,” says Hemant Rupani, director, sales, Mondelez India.

Technology is helping the company to zero in on the right markets thereby minimising loss of resources including money and time. Today, when the company looks to expand to more villages, it is able to keep in mind the kind of impact that it will have on the operational ease and cost of distribution.

The company is also focusing on integrating technology at the time of the transaction. The average salesperson handles multiple outlets, leaving it impossible to sell over 100 SKUs (stock keeping units) in a targeted manner. Identifying this challenge, Mondelez India has equipped the sales team with hand-held devices that are loaded with an application that guides them regarding the kind of transaction they should carry out at the retail level. 

These devices have applications that work on historical data-led algorithms tracking the last three months’ transactional (sales) history at the retailer level. Based on the data, the application guides sales personnel through the kind of products they need to sell to a retailer and the specific promotion or launches that the retailer needs to be targeted with.

Next, Mondelez India is using technology to monitor its assets including coolers on the ground. “Traditionally, the challenge we had was to keep an eye on our equipment shifting from one outlet to another or being removed from the premises after an outlet shut down. 

It was always a nightmare reconciling assets from time to time,” says Rupani. To fix the problem, the company is using QR code on types of equipment to track their location and working conditions.

Rini Dutta, co-founder, Centric Brand Advisors, says, “Companies like Mondelez invest a fortune in cooling units to ensure their products are stored at the right temperature and deliver the desired taste (consumer) experience to buyers. Technology investments will help the company know where their cooling units are and how they are being utilised to sell the company’s brand.”

Apart from technology advances, Mondelez India is working towards reducing the time from factory to market, ensuring that it stocks the minimum inventory at any given point of time. The company has moved to what it calls the “continuous replenishment system”. In a traditional distributor-driven environment quite often it is the organisation that plays the role of pushing the stocks to the distributor which in turn focuses on selling the stock. It has moved away from a push- to a pull-driven system.

“When you have ample time to market you are carrying a higher cost in the form of working capital not just in your internal system but also for the distributor. This has a bearing on the cash flow requirement and the profitability of the distributor. With lower stock holdings, one benefits from reduced inventory carrying cost. And the other benefit is that if you are carrying lower inventory, the risk of returns and damages also goes down,” says Rupani.

Essentially, the sales force and distributors are not measured and rewarded on the stocks that the company passes on to them but they are evaluated for passing on the products to retailers. Such an approach helps reduce errors in manufacturing and pushing manufacturing closer to what the actual demand is going to be. The sales team is using an advanced algorithm to forecast demand. 

In addition, Mondelez India has shifted focus on running its business based on trade inputs to consumer inputs. With exclusive dependence on trade inputs earlier, the company at times ended up with high stocks which may not be in sync with consumer demand.