Produkty Pitania Company: “There will always be an intermediary between manufacturers and retailers”
— 2005-10-12 —
Any company striving for a prominent position in the Russian market should deliver highly competitive consumer goods at an affordable price. But price is greatly influenced by the number of links in the supply chain; and the only way to reduce the costs of producing high quality products is to reduce the number of intermediaries between production and retail sales. Damir Imamovic, Produkty Pitania Vice-President recently spoke out about the importance of logistics.
Produkty Pitania Company started out in Russia by importing chicken legs. Then in 1996, the company’s founder, Stefano Vlahovic made the decision to set up production facilities in the Kaliningrad region. At that time, distribution was mainly focused on transportation and warehousing technologies. But then we realized the importance of taking a more systemic approach to business, using logistics as an important tool for efficient management. Today we can say that we owe our 10 years of market leadership in Russia largely to the fact that we have built a competitive logistics department.
Initially, we decided to rely on our own delivery networks, taking into account the low-quality service level offered at that time by local operators. In addition, local storage facilities had been equipped with four-story refrigerators, which were old-fashioned and so we began dealing with prominent western suppliers to purchase state-of-the-art equipment.
Presently the company operates three distribution centers located in Kaliningrad, Brukhovetskaya village (Krasnodar territory), and Staraya Kupavna village (Moscow region) – all of which have immediate access to railway service. Two new distribution centers will open soon in Novosibirsk and Yekaterinburg.
It is up to any company to decide whether to set up its own logistics network or use existing logistics services. Although Produkty Pitania has chosen the first method, we also cooperate with distribution partners. In fact, we use our own facilities to deliver goods to large cities throughout Russia, while also trying to attract exclusive distribution partners at the local level. These partners work directly with us, the manufacturer. So they know all of the competitive advantages of our products and can help us obtain a better local retail position; thereby reducing the number of intermediaries in the supply chain, speeding up sales, boosting turnover, and reducing costs.
I am convinced that it is impossible to be the leader in two different areas, and for that reason we will concentrate on developing our segment of the foods market. Because we expect western operators to come to our countries in greater numbers, Russian companies will have to expand their product lines and improve their services to meet the growing market demand. Both Western and Russian experience indicates that only specialized companies are capable of providing high quality, inhouse logistics, which is why most companies will continue to outsource these services.