Field execution isn’t a cost to be minimised. It’s a revenue capability to be invested in. The businesses that treat it as the former tend to find out what it was worth when they no longer have it.
Most FMCG businesses have been here in the last few years. Cost pressure hits, field execution is a large visible line item. Cheaper provider makes a credible pitch and a decision to switch gets made.
Twelve months later, the savings haven’t materialised but a number of other things have, things that never made it into the original cost modelling.
This isn’t a criticism of procurement doing its job. Scrutinising field costs is entirely legitimate and in a lot of cases well overdue. The problem isn’t the question being asked. It’s the framework being used to answer it. When the evaluation begins and ends at the hourly rates or unit costs then a significant portion of the true commercial cost of field execution is simply ignored.
The rate card conversation where nobody wins
Rate card negotiations feel straightforward. Provider A charges more than Provider B. Provider B demonstrates its capability (often in a presentation supported by some friendly references). Procurement has met their cost reduction targets, the saving is locked in, business case is approved and the transition begins.
What rarely features in the process is a business case model of downstream commercial consequences. Not because people aren’t smart enough to build one but because often the data to build it isn’t sitting in the same room as the procurement conversation. The execution rates of the outgoing provider versus the incoming one isn’t a procurement metric and it’s hard to compare. The missed sales days on activating promotions following a field team transition isn’t a finance metric. The number of off locations not secured isn’t something that typically gets factored into a decision.
These aren’t soft or ambigous outcomes. They’re revenue. They just don’t get attributed back to the field execution decision that caused them.
Experience has shown that non compliance to promotional ends can have anywhere between 30% – 50% impact on a stores sales. So a drop in compliance of a few % can have a meaningful impact.
It’s a reasonably accepted rule of thumb that every 1% drop in On Shelf Availability (OSA) has a 0.5% impact on sales. Small movements driven by good or bad field execution that can have big impacts on sales, although rarely directly attributed to execution.
What the rate card misses
A real cost model for field execution has five categories not captured by the rate card. Most businesses model few or none of them as part of a process:
- Missed promotional windows and compliance failure.
A promotional programme is a time-bound commercial asset. When execution quality is inconsistent, wrong placement, incomplete set-up, missed stores the opportunity is gone. The promotional investment was made. The marketing budget was spent. If the field execution wasn’t there at the shelf then a portion of that investment has generated no return. The cost isn’t just the execution failure itself and missed sales it’s all the promotional spend sitting behind it that went to waste.
- OSA.
Out-of-stock at shelf level is among the most directly measurable forms of revenue loss in FMCG. The causal chain from inconsistent field coverage and execution contributing to OSA and lost sales is well established. It just doesn’t usually appear in any field execution cost conversation.
On a national field programme covering a few hundred stores, even a marginal OSA deterioration driven by inconsistent coverage or execution can represent a revenue impact that dwarfs whatever was saved at the rate card.
- Distribution loss in independent and specialist channels.
The grocery majors have enough structural process around them that distribution tends to be reasonably protected even with variable field quality. Independent grocery, pharmacy and specialist channels are far more sensitive. Distribution in these channels is often relationship dependent and won through consistent presence and lost through inconsistent coverage. The rep and their actions matter, turning up matters.
- Planogram drift and secondary placement failure.
Planogram compliance degrades without maintenance, everywhere. In a high-SKU category with regular range reviews stores that are not maintained with the right frequency and capability will drift. Wrong facings, discontinued lines still on shelf, new lines not set up. Secondary placement is even more fragile; it’s discretionary space that requires an ongoing relationship and a persuasive conversation to hold. These outcomes don’t disappear overnight but degrade over time which is partly why the link back to a change in field execution quality gets missed. The deterioration is gradual enough to be explained away by other factors.
The true cost of execution model
If you were to stack these cost categories against the direct execution rate, the picture can change materially.
Take a field programme where switching to a lower-cost provider saves 10%. On a programme of meaningful scale that’s a real saving, potentially up to hundreds of thousands of dollars. The business case for a switch looks solid.
Now add the downstream costs. A compliance failure rate that’s five percentage points lower than the previous provider generates promotional waste on every campaign. An OSA rate that’s marginally worse across the store estate. Distribution in independent channels that softens gradually over twelve months. None of these costs appear in the field execution budget. They appear in the P&L as missed sales often explained away by market conditions, competitor activity or category headwinds.
The model isn’t complicated. It’s:
Direct execution cost + compliance failure cost + OSA cost + distribution loss + rework cost = true cost of execution
The rate card saving sits in the first term. The commercial cost of the decision sits in the other four. For most businesses that have made this trade-off, the honest version of that equation doesn’t look as clean as the original business case.
What a better commercial conversation looks like
The argument isn’t that cost should be ignored just that it should be evaluated against a complete picture of commercial consequence, not just a rate card comparison.
The data you need to do this sits in different parts of the business, commercial, operations, category. None of it sits naturally with procurement, which is partly why it doesn’t make it into the evaluation.
Before your next field execution review, spend an hour building a rough version of this model. What is a one percentage point change in promotional compliance worth to your business? What does a 1% OSA movement cost you across your store estate? You don’t need precision. You need a number credible enough to change the conversation.
When the question changes from “how much can we reduce the rate?” to “what’s the commercial cost of the execution quality we’d be trading away?” your decision may well look different.
