How to optimise sales & distribution for peak performance for FMCG success in Indonesia

Pain points in FMCG Distribution and Strategies to Overcome them

Indonesia’s FMCG and distribution industry faces a complex set of challenges that impact operational efficiency, profitability, and market competitiveness. These challenges span distribution networks, sales performance, inventory management, and digital transformation. Several core challenges are holding back operational efficiency, includes:

1. The Critical Role of Distribution in Indonesia

Indonesia’s size and market dynamics make distribution critical for companies in the region. Logistics and networks must adapt to varying conditions as an archipelago of more than 17,000 islands.

There are localised challenges that companies need to consider like:

• The quality of infrastructure varies significantly, with major cities having robust supply chain networks while rural and remote areas often face challenges with unreliable transportation and warehousing facilities.
• Effective distribution management in Indonesia demands a deep local understanding and tailored regional strategies due to the presence of over 700 local languages and cultural diversity.
• Regulatory complexities, including varying regional policies, can affect supply chain efficiency, necessitating businesses to maintain flexibility and ensure compliance.

Without an optimised distribution network tailored to these challenges, companies risk higher costs, stock imbalances, and delivery inefficiencies that directly impact profitability.

Addressing these distribution challenges requires a multi-faceted approach:

• Partner with industry experts who understand local market dynamics and can develop tailored regional strategies
• Implement practical, out-of-the-box solutions that consider each region’s cultural context and communication preferences
• Create optimised territory plans that balance workloads and ensure appropriate customer coverage, even in areas with infrastructure constraints.

2. Sales Performance Issues

Unstructured sales territories create inefficiencies in customer coverage due to a lack of well-defined boundaries for sales teams.

Misaligned incentives cause sales teams to focus on volume rather than profitability, placing excess stock in suboptimal locations.

Limited data utilisation prevents firms from making informed sales decisions, as they rely on intuition rather than leveraging historical data.

Renoir’s Sales & Distribution Performance Optimisation Suite includes Optimised Sales Territory Planning, ensuring equal workload distribution and proper customer coverage. This addresses the problem of unclear territories, leading to inefficiencies in customer reach and sales efforts. Optimising territory planning, aligning incentives with profitability and providing real-time sales monitoring enables FMCG companies to improve sales performance.

3. Distribution & Channel Bottlenecks

Ineffective demand forecasting creates stock imbalances across distribution points, resulting in both excess inventory and stockouts. This Renoir case study demonstrates these challenges at a vehicle distributor who struggled with stock optimisation. The solution involved a strategic approach to route management, where sales outlets were classified based on their demand patterns and potential. This classification enabled more precise stock allocation, preventing excess inventory in low-volume areas while ensuring adequate supply in high-demand locations.

Apart from this, other challenges that falls within this premise includes:

• Unauthorised sales in parallel markets that harms brand reputation and disrupt pricing strategies.
• Distributor misalignment when they focus on easy-to-sell products rather than addressing the actual market demands.

Parallel market sales, where products are sold through unofficial channels, can dilute brand reputation, undermine pricing strategies, and cause a loss of revenue. By establishing checks and controls, companies protect their brands and pricing and ensure that their products are sold through authorised channels.

4. Warehouse & Inventory Management Inefficiencies

High shrinkage rates, driven by theft, mismanagement, and a lack of process discipline, contribute significantly to stock loss. Inconsistent stock audits—often infrequent or poorly managed—compound this issue and lead to discrepancies in inventory records.

Additionally, inefficient warehouse layouts and suboptimal picking strategies result in slow order fulfilment, extending order processing times and impacting overall operational efficiency.

Automated Inventory Reconciliation is a strategy to address inconsistent inventory audits, which can result in recorded/actual inventory discrepancies. Companies can maintain accurate inventory records and reduce errors by automating and regularising the stock reconciliation process.

5. Logistics & Delivery Gaps

Many firms struggle with inefficiencies stemming from poor route optimisation, significantly increasing transportation costs. To make matters worse, unauthorised product diversions frequently take place, causing financial losses as goods are rerouted without proper authorisation.

The absence of real-time tracking further exacerbates these challenges. This creates critical visibility gaps in logistics and hinders the ability to proactively manage delays and disruptions.

With a combined strategy of using route optimisation technology, strict delivery compliance checks, and real-time tracking, Renoir helps companies reduce costs, improve delivery reliability, and enhance overall efficiency in their logistics operations.

6. Pricing & Promotion Weaknesses

Inconsistent discounting practices, often caused by poorly managed discount structures, erode profitability and create pricing confusion. To address this, businesses can implement dynamic pricing tools and establish clear discount governance models to maintain consistency.

Promotional misalignment is another pain point, where campaigns fail to target the right audience, leading to wasted spending. Many companies also struggle with a lack of ROI measurement, leaving them unable to assess the effectiveness of their initiatives.

Competitive pricing models based on real-time data can address the lack of ROI measurement. By using real-time market data, companies can ensure that their prices are not only competitive but also reflect the true value of their products. This enables them to optimise their revenues and maintain their market share by keeping up to date with market trends.