Unit 8.case
Case Study: Private Industrial Network for FMCG Distribution
IT 204: E-Commerce
Learning Objectives
By the end of this case study, you will be able to analyze how a private industrial network (PIN) can solve common supply chain challenges in the FMCG sector.
- ✅ Understand the business problems of fragmented ordering and poor demand visibility.
- ✅ Identify the key components of a private industrial network solution.
- ✅ Evaluate the business outcomes of implementing a PIN.
- ✅ Differentiate between private networks and public marketplaces.
The Challenge: A Fragmented Supply Chain
An FMCG firm faced significant operational issues due to a lack of system integration:
Problem Areas 📉
- Inconsistent ordering across regions.
- Manual processes leading to errors.
- Poor visibility into actual retail sales.
Negative Impacts 💥
- Frequent stockouts at the retail level.
- Expired stock at the distributor level.
- Inefficient promotion management.
The Solution: A Private Industrial Network (PIN)
The firm launched a unified digital platform to connect its ecosystem.
Private Industrial Network (PIN): A digital network designed to coordinate communication and transactions among a limited number of trusted partner firms. (Ref: Ch. 8.5)
Core Components:
- Centralized Distributor & Retailer Portals
- Application Programming Interfaces (APIs) for system-to-system integration
Key Move 1: Standardization & Integration ⚙️
Creating a "single source of truth" was the first step.
- Standardized IDs: Unique codes for every product and catalog item, eliminating ambiguity.
- Digital Document Exchange:
- Automated Orders (EDI/API)
- Advance Ship Notices (ASNs)
- Electronic Invoices
Key Insight: Standardization is the foundation for automation and accurate data sharing in a collaborative commerce network.
Key Move 2: Gaining Demand Visibility 📊
The PIN provided unprecedented insight into the sales channel.
Sell-in vs. Sell-through
- Sell-in: Data on products sold from the firm to the distributor.
- Sell-through: Data on products sold from the distributor/retailer to the end consumer.
Why it matters: Real-time sell-through data enables proactive inventory management and prevents stockouts.
⚡ Automated expiry alerts helped distributors prioritize selling older stock.
Key Move 3: Empowering the Retailer 📱
The solution shifted focus from manual sales to self-service.
- Dynamic Promotion Engine:
- Allowed for complex, tiered discounts (e.g., buy 10, get 1 free).
- Enabled rapid rollout of new promotions across the entire network.
- Retailer Self-Ordering App:
- Retailers could place orders 24/7, check stock, and view promotions.
- Reduced the administrative burden on the sales force.
- Improved order accuracy significantly.
Key Move 4: Logistics & Financial Integration 🚚
The network extended beyond orders to fulfillment and payment.
Logistics Integration
- Real-time shipment tracking from warehouse to distributor.
- Digital Proof-of-Delivery (POD) capture via mobile app.
Financial Integration
- E-invoicing accelerated the payment process.
- Automated credit controls within the portal prevented over-ordering.
PIN vs. Net Marketplace
This case illustrates a Private Industrial Network. How does it differ from a public marketplace like Alibaba?
Private Industrial Network (PIN)
- Focus: Supply chain efficiency
- Scope: Few, trusted partners
- Goal: Collaborative commerce, long-term relationships
- Example: Walmart's Retail Link
Net Marketplace
- Focus: Sourcing & procurement
- Scope: Many, competing suppliers
- Goal: Transactional efficiency, finding lowest price
- Example: Ariba Network
Outcomes: Measurable Business Impact 🎯
The implementation of the PIN delivered strong results across the board.
Operational
✅ Improved order fill rate
✅ Drastically reduced stock expiries
Marketing
✅ Faster rollout of new promotions
✅ Better data for targeted campaigns
Financial
✅ Improved cash conversion cycle
✅ Tighter credit control
Practical Application: The Nepali Context
🔍 Scenario: A Large Nepali FMCG Distributor
Imagine a major distributor like Sharda Group or a large producer like Chaudhary Group managing distribution for products like Wai Wai noodles across Nepal.
- Challenge: Coordinating with thousands of small "Kirana" stores, wholesalers in different provinces, and managing logistics in difficult terrain.
- PIN Solution: A simple, mobile-first app (a PIN) for retailers could allow them to:
- Place orders directly via their phone.
- Receive updates on new schemes and product availability.
- Track deliveries from Kathmandu to their local hub.
- Benefit: This would reduce reliance on sales agents visiting each store, improve stock levels in remote areas, and provide CG with real-time sales data from across the country.
Summary: Key Lessons & Takeaways
What can we learn from this case about SCM and collaborative commerce?
Shared Truth: PINs create a single, shared source of data (products, orders, inventory) across all partners, reducing disputes and errors.
Start Small, Expand Gradually: Begin with core, high-impact documents like orders and invoices, then expand to logistics, payments, and analytics.
Empowerment Drives Efficiency: Retailer self-service not only improves order accuracy but also frees up the sales force to focus on strategic relationship-building instead of order-taking.