Personally, I am not very fond of the term, slums. I think it is loosely defined term for a type of informal market. However, with all their problems and challenges there is a lot to learn from slums from a business perspective.

Entrepreneurism – slum areas are highly entrepreneurial, with a high degree of business activity. Most houses also double as business premises. While this is often out of economic necessity, there are some interesting models coming out of these organic (and often unregulated) businesses. During my first visit to Lagos’ Makoko, I was impressed with the supply chain of Nollywood movies (Nigerian films). Nollywood hawkers were everywhere, with no shortage of supply (and demand). The lack of law enforcement also provides some advantages to entrepreneurs. Because the market is informal, most businesses trade without bothering to fill out any paper work, keeping start-up costs low and speeding up the notoriously slow process of starting a business in Nigeria.

Low cost distribution – slum area are normally densely populated. Because such areas often have poor infrastructure, a conventional route system is normally ineffective in these areas. However, with some ingenuity, high density can be converted into quick delivery and turnaround time. For example, in Dhaka’s Motijheel Thana there is a highly effective cold chain (ice) distribution system catering to fish mongers. Deliveries are made with pushcarts and completed before 11 am. In 1999, while working in the Coke system in Ethiopia, my team and I rolled out a low cost manual distribution system to cover our outlet base in an informal market area. The model was by no means unique to Ethiopia or Africa. However, what made it different was that it was a managed distribution system that required detailed planning and implementation. The distribution model also created a high number of jobs in this poor area, about which The Harvard Kennedy School wrote a case study. The distribution system has since been adopted by a number of companies operating in Africa.

Environmentalism – poverty inspires frugality as well as innovation. When walking around in slums, you notice the importance of waste recycling. From computers to packing material, nothing gets wasted. Soda cans are hammered and reshaped into toy airplanes to sell to tourists. Grain sacks become patches on frayed clothes. Individuals living in slums already understand fully the environmental call to “reduce – reuse – recycle”.

Community projects – the extreme social and economic challenges faced by those living in slums has inspired innovative social programs and partnerships. In Nairobi’s Kibera there are a number of NGO projects focusing on how to convert waste recycling into stable income generation, as a means to lift individuals out of poverty. A number of organizations are also evaluating the potential of distributing “social products” such as condoms and vitamins to such areas. Simon Berry and his highly visible Cocalife campaign, is a great example. Escaping the slum is an unlikely reality for most and companies and NGOs need a fresh approach to operate in these areas.

Channel strategy – companies must map out a clear channel strategy and identify which channel the selected distributor will service. A poorly defined channel strategy can severely damage any distributor roll-out. It is critical that companies understand how channels function and operate. One size does not fit all.

Selection criteria – companies need to understand the key components of a successful distribution partnership. Many distributors fail because critical components of the selection criteria are overlooked. The selection criteria will likely include important components such as capital, infrastructure, warehousing, transportation and required organizational structure.

Management – do we have management buy-in and is the distributor fitting in with our strategic goals? A distributor roll-out requires patience and a continuous improvement mindset. Small incremental changes can sometimes go a long way.

Territory – is the territory well defined and does the distributor have the ability to service the territory? Companies must build distributor capability and schedule joined training sessions. Companies must also ensure they have detailed territory maps and a clear understanding of the outlet density.

Outlet base – are traditional and non-traditional channels well defined? in most emerging market, determining the outlet base can be a challenging undertaking. Companies need to understand both the existing and potential outlet base. A well defined every dealer survey (EDS) is a key component of any successful distributor roll-out.

Customer service frequency – Are they over or under servicing their customers? Companies must have a clear understanding of the service frequency that both the distributor and the customers require.

Role definition – do we have a clear understanding what the company and the distributor are responsible for? What does the organizational structure look like and how will the company support the distributor? Does each profile (e.g. salesperson) have a clear understanding of his or her role?

Account development – account development is a critical component of any distributor operation. Not all accounts are equal. In most cases companies need to prioritize and focus their attention on high value or strategic customers. Companies also need to determine how they will split the account development activities between the company and the distributor.

Cost to serve – the true cost to serve is sometimes underestimated and companies must have a clear understanding of the cost to serve for both the distributor and the company. In many cases in emerging markets, financial cost centers provide limited data and financial modeling is essential to determine the true cost to serve . Many distributors also fail because the remuneration is set too low and not adjusted for inflation on a periodic basis.

Transportation – is the distributor making use of low cost distribution? For example pushcarts or motorbikes. Is the vehicle or cart load configuration inline with our requirements?

Warehouse – the warehouse function is sometimes overlooked when a company implements a new route-to-market system. Companies need to understand how the new system will impact the warehouse function and what changes need to take place.

Key Performance Indicators – focus on the key performance drivers of your business and don’t overextend yourself. Sometimes less is more. Include key performance measurements in your business planning process and evaluate on a yearly basis whether you are using these measurements to track and improve your business. There is no point it tracking something just for the sake of tracking.

Flow- are the processes and systems well defined and do we have a clear understanding of the product, cash and information flow? Are processes and systems standardized?  Always aim to eliminate non-value adding activities where possible. Standard Operating Procedures (SOPs) simplify your business procedures and help to ensure the same quality in all operations. Emerging market operations often lack critical skills and don’t make any assumptions what people can and can not do.

Complexity – can the distributor handle the level of complexity in the business? In many cases distributors that distribute all SKUs to all channels fail. Always aim to reduce the complexity in the business.

Collaboration – how will the distributor share information with the company? Too often critical information is only available at distrbutor level and not shared with the company. What role can technology play in all of this?

Take note of the evolution – too often supply chains in emerging markets just evolve without any strategic intend. Modern trade and retailing are expanding and middle class consumers shopping patterns are changing. How will these changes in the market affect your business and are you taking the necessary steps to adapt to these changes?

In a competitive environment, Consumer Packaged Goods (CPG) companies are increasingly forced to get within arms’ reach of the retailer and consumer. CPG companies that have a Route-to-Market strategy that includes a direct focus on mom-and-pop stores are the most successful in reaching the “base of the pyramid”.

The buy-in-bulk mentality is unlikely to have a major impact in developing markets, as transport limitations, poor cash flow and infrastructure will restrict purchasing options. Nielsen’s research has indicated that modern trade is on the increase in a large number of emerging markets. However, even with the increase in Modern Trade, mom-and-pop stores will continue to command a major share of the retailing environment.

Some of the advantages of well designed Route-to-Market strategy dealing with mom-and-pop retailers are:

Increased outlet penetration – the Route-to-Market strategy is designed to penetrate small, high frequency retailers, and increase availability within such outlets. The strategy allows “trial” SKUs entry and assists companies in controlling the SKU range in their identified strategic channels.

Improved merchandising – even though merchandising space in quite limited in these outlets, companies will find it easier to negotiate merchandising space compared to modern trade retailers. Multi-nationals have more leverage with mom-and-pop retailers, and can negotiate better space allocation and control the message in these outlets. Innovative merchandising designs (e.g. hanging shampoo racks) will further support this strategy.

Improved retail and consumer Insights – by removing the supply chain layers, CPG companies gain a better understanding of retailers and ultimately the end consumer. This grassroots approach will improve communication between the various parties and provide the company with valuable insight about their consumer base.

Improved profitability – a well designed Route-to-Market strategy will yield improved margins and reduce incentive and retailer discounts being paid to Modern Trade retailers.

However it is important to highlight some of the challenges that companies will face with such a strategy:

Increased Route-to-Market complexity – increasing the outlet base to include mom-and-pop outlets adds complexity to the Route-to-Market and the business. Drop sizes will be much smaller and the increased outlet base could put additional pressure on resources.

Information flow dilemma – penetrating smaller retailer distribution networks is unlikely to justify investment in information technology. e.g. mobile devices to support Enterprise Resource Planning (ERP) systems. CPG companies will be forced to reevaluate sales data processing and information gathering.

Increased personnel count – managing, controlling and monitoring an increased outlet base will require additional human resources. Employee turnover tends to be higher for employees dealing directly with mom-and-pop outlets. Market conditions are tougher and increased and specialized training will be required.

Companies can benefit immensely by expanding their retail base and penetrating smaller retail outlets. For companies to succeed, market development and training activities must be on the forefront of Route-to-Market strategy. Such strategies will require a major rethink and redesign. Changing to a Route-to-Market strategy that includes smaller mom-and-pop outlets will affect all aspects of the business, including supply chain, sales, marketing and human resources. A strategic shift should not be taken on lightly. However, for the winners, the rewards will be large.

Article fist published in 17th of July 2007 for the Gerson Lehrman Group Councils website

Mobile phone networks have proven to be a vital piece of technology for Africa. The technology is playing an important part in bridging the infrastructure divide and assisting entrepreneurs and businesses to improve efficiency. The mobile revolution is still in its infancy and organizations are slowly adopting new tools and technology to conduct business.  The not-for-profit sector has been on the forefront of adopting and piloting a number of projects and there are some interesting learnings for the business world.

Communication for the mobile age

One of the major challenges for any operation is keeping customers informed. When conducting customer service surveys in Africa, outlets often complain about the lack of communication about product offerings and promotions.  Many customers are also frustrated about a lack of timely information.  As one retailer put it to me in Guinea, “by the time we get to understand the mechanics of the promotion, the promotion has ended.”  Most managers and supervisors are using SMS extensively to communicate with customers and increasingly companies are adopting it as an enterprise application strategy. FrontlineSMS created a text messaging system for not-for-profit organizations to address poor communication, which is seen as a major barrier for many organizations. The system leverages tools already available to most organizations, namely computers and mobile phones. The same system is being adopted by companies. For example, companies can use the system to send out mass SMS messages. Companies can categorize their databases and tailor messages according to trade channels and profiles.  Companies can also use the system to collaborate more effectively with trade partners and share information.

Mobile learning

In Africa, as in many parts of the world, people are spending more time reading text on mobile phones and mobile learning has seen some interesting developments. Projects such as the Imfundo Yami/Imfundo Yethu in South Africa is currently piloting a project to teach kids mathematics on the mobile phone.  The Shuttleworth Foundation in South Africa has also taken the initiative with the M4lit (Mobiles for literacy) project to get children to read. In Africa, where corporate training budgets are often overstretched, mlearning can be viable blended learning option.

Mobile Search

With limited cash flow, many retailers run out of stock on a regular basis and delivery frequency does not always satisfy demand.  With low drop sizes (low purchases) increasing delivery frequency is not always a viable option. Outlets are sometimes unaware where to purchase stock when they run out. Mobile search, such as applied by Google’s Application Laboratory  (AppLab) in partnership with the Grameen Foundation, models interesting possibilities for business.  AppLab builds on the success of another earlier project, Village Phone, in which local entrepreneurs rent cell phone use to villagers. AppLab includes Farmer’s Friend, a searchable database with agricultural advice and weather forecasts, Clinic Finder, to locate nearby health clinics, and Google Trader, which matches buyers and sellers of agricultural produce, commodities and other products. Companies can adopt mobile search to provide important information regarding location and product offering to consumers. It can also be used to assist shop owners in locating the nearest supply point.  Users can text a query to a short code and the service will text back the result.

Mapping stock-outs

Most companies in Africa will tell you that visibility in the supply chain is one of the biggest challenges they face. With a lack of IT infrastructure it is difficult to keep track of stock levels and sales data; real time data is just a dream for most.  However, organizations are increasingly starting to use mobile phones for data collection. Stopstockouts.org currently uses the Ushahidi website mashup, online mapping technology,  to track stock-outs of medical supplies with text messages in Kenya, Malawi, Uganda and Zambia, all in near real time. Ushahidi  was initially developed to map reports of violence in Kenya after the post-election fallout in 2008. Text messages are connected with mashups, and create a picture of medical out of stocks.  Businesses can use the same technology to track sales and stock levels and identify problem areas and regions.  Online mapping can also be used to collect outlet base information and create route maps for distributors and salesmen.

SMS for counterfeit

Most African consumers can testify that purchasing medication can be a risky undertaking.  International Medical Products Anti-Counterfeiting Taskforce (IMPACT) estimates counterfeits comprise around 1% of sales in developed countries and more than 10% in developing countries. However, in parts of Africa, more that 30% of the medicines on sale can be counterfeit.  MPedigree, a non-profit based in Ghana fights counterfeiting with SMS technology. Consumers can SMS a scratch off panel code to determine if medicine is counterfeit. The same technology can also be used by companies in the textile and beverage sectors, where counterfeit is rampant and a major barrier for market entry.

Banking for the unbanked

With very low banking penetration in Africa, mobile banking provides great opportunities for organizations.  Many distributors run out of stock because, as one distributor explained in Zambia, “to go to the bank is half a day out of my trading day. But no cash, no delivery”. Mobile banking (M-Banking) schemes such as M-PESA in Kenya and Wizzit in South Africa are receiving increased attention. As most mobile phone users make use of prepaid cards, prepaid calling credit has emerged as a viable mobile paying system in some countries, notably Kenya. Customers can use M-Banking to pay bills and transfer money. M-PESA is also being used as a savings account even though the scheme does not pay interest. Olga Morawszynski’s excellent research on M-Pesa found that it saves people time that they would otherwise spend traveling between their home and city to deliver money.  M-banking holds real potential for organizations in Africa where cash flow and a reliable banking infrastructure remains a constant headache.

Mobile phones have had an enormous impact on peoples’ lives in Africa and can be counted an unparalleled success when compared to any other technology. As a cheap available technology, mobile technology presents a great opportunity and companies should seize the opportunity.

Aquatabs – the Hybrid Social Distribution Model

Last month I spoke to Michael Gately, Marketing Director of Medentech.  The company is well known for its Aquatabs brand of rapidly dissolving tablets. It is one of the best known and most respected names in point-of-use water purification globally and is used to disinfect billions of litres of water every year.

TN: What is the public private partnership?

MG: It is a collaborative model that involves WHO (World Health Organization), UNICEF (The United Nations Children’s Fund) and at country level it also includes central, local governments and NGOs (Non-Governmental Organizations).

TN: Your Route-to-market strategy revolves around a hybrid model. Can you elaborate on this?

MG: The hybrid model includes three legs:  Emergency preparedness, retail sales supported by above the line advertising and door to door social marketing.  At the retail level we normally work with local importers. However , in a number of countries, NGOs such as PSI (Population Services International) can also fulfill the role of importer and distributor at the retail level.

TN: Can you explain the door to door distribution?

MG: In some countries NGOs are organizing a door to door sales person. This person fulfills the role of a community based distributor and also an outreach worker. They derive their income from the sales of Aquatabs and other products. Door to door distribution is very important as the sales person finds himself right there where the child might be sick today. The sales person also has the opportunity to hand them a behaviour change message and handle any objections they might have. This is very hard to do with above the line advertising.

TN: What is your pricing strategy?

MG: We don’t arrive in a country with a price point and we normally work backwards to make sure everybody in the sales channel earns a livable wage. We also want to make sure that our prices are in line with what people are willing to pay for our products. The margins that people can earn are very attractive and Medentech has a long term commitment to keep their prices affordable.

TN: How do you forecast demand?

MG: Pre-positioning is a big part of what we do and we have stock pre-positioned all over the world. The businesses we are in have enormous search capacity. You don’t know when another Tsunami might happen.  We normally plan five years ahead and are currently constructing a new factory in India. Our capacity is way beyond what any urgent search might require. However, having products available in local shops is the ultimate in crisis preparedness.

TN: Do you provide any training to partners?

MG: We have developed a comprehensive training program for emergency water treatment. It is a day long training program that we provide to all of our distributors. The training program covers key issues such as water treatment options and what to do in an emergency.

TN: What does the future hold for water purification?

MG: The water sector is going to become more and more stressed and the need is growing.  There are 5,000 children a day dying due to diarrhea and we can have a substantial impact. Hybrid social marketing is still a relatively new science and we are learning all the time.  However, there are organizations with expertise in the area, in particular, PSI, AED and Path. The mood among our network is that we just need to get on with it and do it.

Managing supplier relationships used to be a zero sum game. Most companies focused on short terms goals where price was the main focus. Bullying suppliers were commonplace in some organizations. Employees took great pride in “facing down suppliers” and relationships were viewed on “how much money we will make”. However, with the increase in outsourcing and volatility in commodities, supplier relationship management (SRM) has moved to the forefront of organizational strategy. Companies are spending increased time on their selection criteria and determining clear best practices to manage partner relationships. However, few companies have mastered supplier management and SRM is in its infancy.

The question of quality

With the increase in outsourcing and the growth in world trade, product quality is increasingly an important factor. Many companies in the pet food, toy and dairy industry are still reeling from recent quality scandals in China and other parts of Asia. These scandals have put increased pressure on companies, as consumers are progressively more concerned about product quality. These quality scandals of late, as well of those in the apparel industry over the past decade, have highlighted the importance of managing relationships and the importance of supplier tracking and auditing. The days where companies could plead “we don’t have control over our suppliers” are gone. Environmental concerns and an increased scrutiny of labour practices also are demanding improved supplier relationships.

Outsourcing to the “unknown”

With outsourcing to Asian countries on the increase, companies need to understand culture issues. Many companies have been burned when outsourcing manufacturing to countries such as India and China. Management practices that worked in one country are not necessarily going to work in another country and companies need to change the way they think and work in other markets. Country values are also different. For example, cutting legal corners is seen as a survival technique and is much more tolerated in some countries. It is important to understand the value system of each country and it is important to assume nothing.

Outsourcing to emerging markets provides companies with unique challenges. Companies must develop contingency plans as delivery delays are normally more frequent. As one executive put it, “getting on time deliveries from our Asian suppliers, is one of our key challenges”. Working in the “unknown” also provides companies with unique legal challenges. Foreign companies trading in China and India have complained in the past about unfair legal practices. Companies must avoid disputes and ensure contracts are clear to all parties involved.  Do not assume all parties will read the fine print and try to avoid legal terms. Always aim to simplify matters for suppliers. Consult lawyers that not only understand local laws but also cultural issues. The interpretation of the law can differ from country to country and cultural issues need to be taken into consideration.

Technology

In recent years, companies have seen technological advances in managing supplier relationships. The day of managing suppliers with spreadsheets are gone, and SRM is increasingly complex. Companies are demanding increased visibility. The need for real time information is on the increase. Companies are investing significant resources in managing suppliers and the use of supplier relationship software is becoming more common place. Supply chain managers are increasingly using the web to collaborate and to communicate with supply chain partners.

Find the right partners

Previously, partner selection only focused on price, with value sometimes taking a backseat. Today, companies are spending increased time and resources to develop and implement a comprehensive supplier qualification process. Companies need to establish a strategic road map and clear selection criteria. For example, the selection criteria may include important components such as strategic vision, capability, capacity and environmental issues. Companies need to evaluate if potential suppliers meet their required standards. Furthermore, supplier selection is not just limited to procurement departments, and companies are increasingly making use of cross functional teams. Employing external agencies to monitor and track supplier relationships is also on the increase.

Building relationships

Companies must always act with the relationship in mind. Companies must have a clear relationship development plan for each partner with clear goals. Building trust is key in any relationship, and trust must be built at all levels of the organization, and not just at senior management level. For example, companies can introduce department induction programs and in some cases even embed suppliers in the organization. The more partners understand each others businesses, the better for all parties involved. With clear communication channels, partners will have the confidence to address problems head on.

Advantages of relationships

One of the key advantages of long term relationships is cost reduction. Companies work together to solve supply chain problems and learn from one another. Better collaboration and communication will lead to increased sales. Improved collaboration can also lead to better demand planning and route scheduling. For example, when Kellogg evaluated Tesco’s inventory levels it realized that most out of the stocks occurred in the middle of the week. Kellogg worked with Tesco and changed its delivering schedule to accommodate the retailer. By changing the delivery scheduled, Kellogg reduced stock outs, increased sales and improved both customer and consumer satisfaction. As the Kellogg example demonstrates, working with suppliers can provide mutual benefits to all parties involved.

In today’s world, companies require suppliers that are results orientated and are demanding increased speed from suppliers. Not all suppliers are equal and all suppliers need to be segmented. Segmentation is critical, as it will determine the importance of the partnership and how much time companies need to spend on building supplier relationships.  All members of the supply chain must have clear accountability and each member of the team must be aware of his or her duties. Companies need to monitor compliance and implement and communicate clear Key Performance Indicators (KPIs). In today’s high speed world, SRM is on the forefront of any successful company.  SRM has changed significantly over the last couple of years, and suppliers are now seen as an extension of the business.

TN: Who is GiG?
GiG is a horticultural sales and marketing business conceived as a partnership between Haygrove (a private UK business) and Concern Universal (an international NGO)

TN: How does GiG tap into Gambia’s important tourist sector?
GiG supplies high quality locally grown produce to Gambia’s hotels and restaurants.

TN: How does it work?
GiG contracts local farmers to grow vegetables and enables farmers to move from subsistence to commercial farming. GiG has worked with over 1000 Gambian producers (indirectly benefiting 5000 people), 90 percent of whom are women. GiG also provides assistance to  farmers to compete in the market place through increased marketing and business skills training and development.

What is a lean?

Lean manufacturing is a management process derived mostly from the Toyota Production System (TPS). A lean process (or system) is designed with a focus on customer value and satisfaction. Its aim is to deliver a product to the end customer quickly and efficiently with minimum waste in the system while delivering superior financial returns to the business. Implementing a lean approach in emerging markets can be a challenging, but possible undertaking for companies. It is important to note that lean principles do not apply only to manufacturing, but also to areas such as logistics and retail. For most companies in emerging markets, this is still a relatively new area. However some companies are already applying a number of lean principles.

Cultural Challenges

In a lean organization, the supervisor fulfills the role of an active problem solver. Traditionally, in emerging cultures, that is the responsibility of the manager. Workers and supervisors are not called upon for advice. Instilling a culture of problem solving takes time, and requires a major shift in the organization. One of the most difficult challenges is to change the behavior and convince staff and managers of the value of lean approaches. Changing the mindset of employees is critical to success, and companies must ensure groups do not view each other as rivals, but rather as team players.  Companies need to ensure that all communication channels are open. For example, when Schneider Electric SA in Peru identified communication challenges between managers and employees, the plant established a communications council to address topics such as customer-service issues and cross-functional communication.  Today Schneider Electric SA is viewed as a model for lean implementation in emerging markets.  Beyond opening communication channels, companies need to invest significant resources in training.

The “small” challenges

In many Asian economies, most products are sold primarily through small shops after being delivered by small third party distributors. Orders are normally much smaller and customers require more frequent delivery than developed markets. With limited technology and visibility in outlets, applying lean principles can be a challenging undertaking.

However, even in small retail shops and distribution centers, companies can assist distributors and retailers to apply lean principles. Companies can help partners to simplify processes and systems and importantly help to reduce lead times. Companies can work with local distribution partners to identify value adding and non-value adding activities. Even in operations with limited technology and manual processes, this is a possibility.

Companies can work closely with distributors to implement systems such as the five s’ (5s: sort, straighten, shining, standardize, and sustain) and to help create visual management tool. In emerging markets, where literacy is sometimes a problem, implementing visual processes and flows can be hugely beneficial to employees. Implementing systems such as the 5s will reduce or even remove the clutter and bottlenecks that so often plague local operations.  Companies can work with partners to provide clear instructions and process flows and in the process realize significant supply chain cost savings. Such lean practices require limited investment and can go a long way in creating a leaner supply chain.

The importance of training

In emerging markets readily available lean skills in the market are limited and companies need to invest time and money in capability development. In countries with high staff turnover such as China and Vietnam, identifying employees that are dedicated to the job ahead, can also be challenging undertaking.

To implement lean principles, such as continuous improvement, requires discipline and companies need to invest in continual mentoring, coaching, and training. Companies are making use of a number of training options including training centers, universities and institutes, such as the Lean Enterprise Institute. Training centers can help companies to build the required capability in the organization and ensure employees understand key lean principles. They can further help the company to create a continuous improvement road map and track employees to ensure they are on the right path to lean success and personal career development.

For most companies, most lean roads lead back to Toyota. The same is true of emerging markets, where Toyota has played a key role. During the Asian financial crisis in the 1990s, Toyota implemented an aggressive emerging market strategy to take advantage of low cost labour and emerging market cost advantages. One of the key challenges was how to implement the same lean production principles they had in Japan, in emerging economies. Toyota was concerned with quality and whether local staff, with a lack of experience and tradition in manufacturing excellence, could implement the same lean principles. Toyota embarked on an ambitious program that invested heavily in training and skills development in these markets. Today, Toyota is reaping the rewards, and remains the exemplar for implementing lean production.

Still, to apply lean techniques in emerging markets, companies need to accept compromises or trade-offs as not all lean principles will be successful. Suppliers in emerging markets typically are not as reliable. Implementing just-in-time can be challenging. It is, however up, to companies to determine which lean practices are realistic and which are longer term goals. Companies that overlook the softer side of implementation will struggle. Change in emerging markets can sometimes take longer, and companies need to focus significant resources on creating the right organizational culture and building capability within the organization. However, with the right approach, leaner operations can be a reality.

Medina market, Conakry, Guinea

How do you create a cold chain in a city with constant power cuts and outages? This is one of the key questions that faced us on a recent project in Guinea, West Africa. Periodic power and water cuts are a daily burden for Conakry’s residents, not to mention the upcountry areas. For consumer goods companies that rely on a cold chain, such as beverage companies, cold availability is a critical component of their business. “Without refrigeration or ice, it is very difficult to activate new outlets”, said one distributor I spoke to. “Ice machines are not designed for power cuts” he explained.

The power entrepreneurs

At Conakry’s Madina market, one of West Africa’s largest markets, I met some entrepreneurs that have decided to create their own power company. “The government is not acting, so we will act”, said one ambitious Medina trader who asked not to be named. They have created a power company by setting up a power grid with a few generators. Each shop owner is provided with an electricity meter making the market one of the few areas with a constant electricity supply.

Some areas are more equal than others

Electricity supply is major barrier for every cold chain in Africa. However, careful evaluation of Conakry city   revealed that it very much depends on where you find yourself. Areas with government buildings and commercial centers receive a more constant supply of electricity. The state owned telecom company Sotelqui S.A, as expected, also has a constant supply of electricity. In upcountry areas, mining areas also are benefiting from a good supply of electricity, such as the bauxite mine in Debele.  Inequalities in electricity access are by no means unique to Guinea. However, this information will be very valuable when drafting your cooling placement strategy.

In Africa, companies are increasingly looking at ice machines and ice distribution. Advances in ice machine solar technology hold real potential and should not be overlooked. However, such technology is still some distance away from becoming mainstream. Setting up an ice route supported with ice boxes however takes time and effort. Identifying potential areas with electricity supply is just the first step. Companies also need to have a clear understanding of the current and potential outlet base. However for companies and entrepreneurs this can be a rewarding undertaking. Ice making and distribution can also be combined with entrepreneur development programs, generating a more inclusive supply chain model. In the words of one shop keeper I spoke to, “give me the tools, and I will show you what I can do”.

Wholesalers - like most of markets in Africa, FMCG companies rely heavily on wholesalers for distribution capability. The market is extremely fragmented with no clear dominant player. Key accounts and organized distribution is limited. Warehouse space is limited with no clear layout principles.

Outlet base – with the current political instability, the outlet base has been on the decline. Once thriving wet markets have seen a visible decrease in traffic and sales. Informal outlets are closing down as merchants are returning to the country side.  The economic upside of living in the city does not hold the same allure anymore.

Transportation – delivery in the city revolves around low cost distribution such as pushcarts with a few Chinese tricycles roaming the street. Tricycles also are being used for ice distribution (e.g. fish and beverages) and some tricycles even act as ambulances.

Pushcart operators – most wholesalers have limited interaction with their customer base and rely exclusively on independent pushcart operators to distribute their products.  Pushcart operators visit the same outlets every day and are not necessary in close proximity to the wholesaler. None of the wholesalers I visited have any outlet information.  As one wholesaler put it, “You better have a good relationship with your pushcart operators, because if they go, so does your outlet base.”

SKU complexity – All sales are conventional selling, with pushcart operators only carrying the SKUs that they think will sell. Carrying low yielding SKUs simply takes “too much energy” and launching a new brand can be a challenging undertaking.  A few companies are starting to explore pre-selling.

Cash collection - pushcart operators handle all transactions and normally have to provide some security prior to doing business with the wholesalers. Family members and friends often assist in this regard. Cash is normally collected at the end of the day and is, in effect, one day credit.

Electricity – Conakry is suffering from chronic power outages that make refrigeration limited and the cold chain challenging at best.  In the words of one FMCG supervisor “When the power goes on at home, I iron all my shirts at once. Delaying my ironing duties can be a fatal mistake.”

However through all the difficulty, companies are launching new brands and an increasing number of suppliers are looking for ways to improve distribution. Guineans have a fighting spirit with hospitality unmatched by many in the region.