Territory Optimization: Needs, Benefits, and Strategies

Scale is often considered a good problem to have. Larger markets generate more profits. The benefits of conquering a large market can far outweigh the costs. 

Yet, for truly large countries like India, which today has the single largest population on the planet, the challenges of scalability are much more formidable due to another challenge: Logistics – which is a very bad problem to have.

The logistics sector in any economy is the backbone of trade. A smoothly operating logistics and transportation industry is crucial to keep the wheels of the economy turning. In the CPG industry, market leaders typically spend less on logistics than other firms, primarily because their supply chain is more efficient. According to a study by Bain & Company, distribution and transportation costs of CPG companies can eat up 6-8% of revenue, and companies with more efficient networks can lower these costs by as much as 25%.

These are large numbers – and are often compounded for large countries like India. The market is experiencing growth in both volumes and depth. For example, during the COVID-19 pandemic and lockdowns, India’s population shifted from the pre-COVID norm of discretionary spending on the internet – to buying even essential commodities online. Consequently, India’s logistics and warehousing industry benefited from this shift, increasing its share of the Warehousing, Industrial, and Logistics (WIL) sector from 2% in 2020 to 20% in 2021. 

Territory Optimization: Solving and optimizing for scale

The scale and diversity of the Indian market makes it essential for CPG brands to optimize their sales coverage, right down to the individual salesperson and beat level. Given the harsh realities of the retail marketplace in India, this has a direct and disproportionate impact on sales revenue. An optimized beat is a profitable beat, and a salesperson traveling on an optimized beat plan is a productive salesperson.

Some things are simply too important to leave to human intuition. Today, FMCG firms have access to the best of AI/ML technology to derive insights from the truckloads of data they possess.

For example, consider the following common problems encountered in sales beats:

1. How do you determine how much time a sales rep should spend at each store? 
2. How many more stores can he cover? 
3. Does his assigned region need to be reduced or expanded? 
4. Does this region need to be split among more sales reps for achieving revenue targets? 
5. Or will the target be achieved anyway, and we can actually exceed the target if we assign more stores to each sales rep?

In FMCG, this process is often called PJP or “Permanent Journey Planning’. In essence, it involves planning the most efficient parameters for the sales force, such as:

1. The most efficient sales territory division amongst different sales persons
2. The most efficient routes for each salesperson to take to maximize coverage
3. The most efficient frequency of each outlet visit
4. The most efficient amount of time spent at each outlet

The analysis is not always straightforward and linear. For example, a supermarket at a mall may witness higher sales throughput but require minimal hand holding, but a newly opened store in a suburban area might require more visits (and more time spent on each visit), even though its numbers might not be very high at the moment. As the use cases and combinations keep getting more and more complex, such decisions cannot be solely left to intuition and trial-and-error guesswork. 

Correctly optimized sales planning solves for the best possible ratio of effort to outcome. The most efficient way to do this is by accounting for future potential sales in low-sale areas, and spending less time and effort on outlets where sales are already maximized. 

Why Territory Optimization: Needs and benefits

Sales teams are always on the move. Territory optimization solves for both scale and inefficiency. When done correctly, it can produce significant benefits for CPG firms:

1. Efficient allocation of resources: Optimized territory allocation and sales beats ensure that your resources are allocated efficiently, and that all outlets and customer segments are appropriately served. 
2. Sales revenue maximization: Territory optimization can generate additional business, since your sales people are now spending the most time at outlets where they are needed most. Focusing on areas of higher potential sales ensures that you’re not missing out on potential revenue opportunities. 
3. Time saving: When their beats and routes are optimized, your salespersons spend less time traveling and more time doing what they do best: sales
4. Cost savings: Territory optimization and route planning lead to significant reductions in costs. For example, an optimized route that covers the maximum outlets daily in the correct order, by making the sales person travel the least distance, can save fuel and travel reimbursement charges for the company. 
5. Increased productivity: All of this leads to increased productivity of your sales force, leading to increased numbers and target achievements. 
6. Maximize motivation and incentives: A productive sales force is a motivated sales force. Optimized beats and territory sharing enables your salespersons to function at maximum capacity. This in turn increases their numbers and increases motivation. 

Types of Territory Optimization techniques 

At its core, the problem statement of Territory Optimization is how to ensure that your sales force covers the most territory in the least time. 

Sales Region Optimization

This involves dividing your target market regions in the most efficient and optimized manner. This maximizes sales performance in each region. You can then identify which territories are under-served and need more focus, and allocate resources accordingly.

Thus, with Sales Region Optimization, you can ensure that:

1. All your territories are being served with maximum coverage 
2. You don’t lose any untapped potential sales opportunities.

Sales Representative Optimization 

Optimizing at the level of each individual sales rep ensures that your sales resources are allocated efficiently, and are operating at maximum productivity and performance. Algorithms today can identify disparities or over-laps in work distribution of your sales reps, and provide recommendations to optimize outlet servicing and sales performance. You can determine where your sales force is being under-utilized and over-utilized. 

For optimum results, plan recommendations need to be tailored to each individual sales representative.

Thus, with Sales Representative Optimization, you can ensure that

1. All your sales reps are functioning at maximum productivity
2. You don’t lose revenue opportunities due to incorrect resource allocation.

Sales Route Optimization

Sales Route Optimization involves providing the most optimized routes and travel time to serve the maximum stores, and thus customers, accordingly. The most efficient routes ensure that your sales reps know exactly where to go depending on their targets for each day or month, spend less time on the road and more time with retailers

The best plans go beyond merely providing a beat plan based on logistical sequencing i.e. listing the stores to be visited by each sales rep in order. It is critical to solve for both width and depth, fully accounting for the advantages and constraints of both. You can thus ensure that each sales rep travels the minimum possible distance and covers the maximum possible stores. 

Thus, with Sales Route Optimization, you can ensure that

1. All your sales reps are working at maximum productivity 
2. All your stores are services appropriately and in a timely manner, leading to higher customer satisfaction and loyalty

All three aspects of Territory Optimization above can be customized and personalized. You can define input parameters for sales activity wherever required, and the FieldAssist algorithm will provide recommendations accordingly. For instance:

1. Each sales rep must not work more than 8 hours in a day
2. Each sales rep must not travel more than 100 kms in a single day
3. Each sales rep must not visit less than 10 stores in a day
4. Each sales rep must not spend more than 20 minutes at a single store

With Sales Territory Optimization taken care of, your sales reps become free to focus on engagement rather than traveling or time management. 

Once the sales routes and beats are optimized, brands can be assured that their sales reps are reaching outlets properly and efficiently. 

Conclusion

As the CPG industry keeps seeking efficiencies, it is imperative to always keep encouraging feedback from the target audience: your sales force. No matter the technology and data science, there is no substitute for direct user feedback. Systems and processes must be designed to incorporate feedback quickly and seamlessly without disturbing existing workflows.  

Brands today need to strive to be at the center of consumers’ attention as much as possible.Territory optimization can create tangible results and measurable successes for CPG firms. As the Indian consumers’ spending power keeps growing, efficient sales planning stands at the very core of FMCG success. 

About Post Author

Deepshri Somani

Deepshri is a product marketing professional passionate about enterprise SaaS and the transformative role of technology in business success. Outside of work, she enjoys exploring culinary delights and advocates for a minimalist and sustainable lifestyle, emphasizing health and wellness.

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