By Andrew Dawson | 11 August 2021 | Published on EntrepreneurDB
Van sales make up the vast majority of the route to market in East Africa, and the market itself is complex and revolves around cash purchasing. There is lack of visibility throughout the chain, which makes orders and sales difficult to track, and it is challenging to accurately forecast demand. Automation has massive potential to revolutionise the route to market in East Africa, moving van sales to pre sales to increase visibility, remove friction and, ultimately, enable just in time (JIT) manufacturing to maximise efficiency and profitability. This removes many of the complexities for van sales, enhances efficiencies and bolsters their security by eliminating cash.
Challenges and complexity
Most retailers in the main market in East Africa make use of cash or Mpesa, but also operate on credit, only paying for orders on delivery. There is also the challenge that, by the time the driver arrives, they may not have the stock the retailer ordered, so invoicing must be done on the fly or changed. The driver must then hold the cash payments, and it is difficult to keep track accurately. The wholesaler is therefore carrying the risk for stock loss and theft, lost payments and more, for anywhere between 24 hours and a week.
There is also potential for error with such a manual and laborious ordering process. The lack of visibility makes the entire process difficult to track, and also prevents any sort of intelligence or analytics from being performed based on sales data.
Automation is key
Digitisation of the value chain delivers the opportunity to automate the van sales operation and provide line of site from the distributor right down to the retailer. With intelligent technology solutions, drivers or sales reps (the elements that make up the term ‘van sales’) will be able to generate invoices on delivery as sales are made, for enhanced accuracy. They will also be able to log payments to enable better tracking.
From a wholesaler and distributor perspective, a platform with a level of intelligence will enable analysis of data around the sales of products and the product mix in relation to the specific van routes. This in turn will empower the distributor to optimise van sales by more effectively stocking vans based on demand and requirements.
On the back end, automation allows for enhanced stock management, as well as allowing for moneys received and invoices to be cross-checked and enabling a settlement process to be put into place to ensure payment. This takes much of the complexity and error prone processes away from van sales.
From van sales to pre sales
The ultimate goal is to shift the van sales environment to presales, which has massive benefits for all parties in the value chain. Pre sales will mean that retailers place and pay for their orders in advance, and then wholesalers and distributors will fulfil these orders.
For drivers, pre sales means that they no longer need to collect money, so they are not carrying cash. This makes them safer on the roads, as they will no longer be a target for theft. They can also become more efficient when delivering, because they no longer need to spend time negotiating and selling goods.
Retailers will benefit from regularity and consistency of deliveries, so that they know when they will receive their goods. They will also have a level of assurance that what they have ordered will actually be delivered, which cannot be guaranteed through van sales as the driver may run out of stock before they arrive. Retailers will also then be able to leverage the ability to do discounts and promotions to drive sales, as they will have predictable stock levels.
Wholesalers benefit from increased efficiency, and from a financial perspective they are better able to maximise cash flow and manage credit lines, because they will be able to ensure that invoices and settlements match. Manufacturers will be able to optimise turnaround and ensure that they are not over – or under – producing goods, both of which negatively impact the bottom line. They will also be able to perform more effective, fact-based forecasting and production processes, and ultimately move to JIT manufacturing.
Live data, enhanced visibility
To maximise the benefits of automation and data analytics, it is critical to have live line of sight throughout the value chain, for instant feedback on stock and sales. Data needs to be real time, to remove friction points in the van sales operation, and to move from van sales to pre sales with predictive capabilities. Digital transformation has the potential to revolutionise the value chain and the main market in East Africa.