Kenya’s Olivine Technology tackles failings in fast moving consumer goods

Kenyan startup Olivine Technology was born from the realisation that was was not well in the fast moving consumer goods (FMCG) space. But with its multi-site sales and inventory management solution, the startup feels it has the answer.

Initially approached by managers of SME distributors and retail outlets to help them manage their sales and inventory, Mark Mwaura, co-founder and chief executive officer (CEO) at Olivine Technology saw there were far deeper problems.

“While they might have had an accounting or perhaps an enterprise resource planning solution (ERP) at their headquarters, their branches and mobile workforce were not networked and synchronised to it. Instead, they were managed using mostly pen and paper, phone calls and SMS, Excel spreadsheets, or other non-networked and non-synchronized solutions,” Mwaura told Disrupt Africa.

“Consequently, the SME owner-managers would spend several hours every morning or evening manually posting transactions and reconciling inventory, sales, cash and debtor positions. These manual processes, more often than not, resulted in excessive downtime throughout the organization, stale or uncollectible customer debts, and high stock and cash leakages due to fraud by employees, who exploited the system’s failures.”

Moreover, the often insufficient and unverifiable records prevented these companies from qualifying for affordable working capital financing from reputable lenders.

“As we interacted more broadly with FMCG value-chain participants – like manufacturers, distributors, and retailers – we discovered that the problem impacts entire FMCG value-chains, and not only in Kenya, but in Africa in general,” Mwaura said.

This is because FMCG markets are dispersed in line with the prevalence of low-density rural settlements and scarcity of large urban markets in Africa, while they have also become highly segmented due to the extreme variations in income and consumer tastes in Africa.

“As a result, FMCG value-chains in Africa are long and fragmented: A manufacturer’s traditional route to market is through a chain of four or more distributors, who in turn mostly rely on a mobile workforce, for example field salesmen and merchandisers, to reach retailer outlets,” Mwaura said.

“This multilayered distribution – combined with a lack of networked information systems for SMEs – creates an opaque value-chain, where manufacturers, distributors and retailers have no visibility on sales and inventory-related transactions performed by their branches, mobile workforce, or value-chain partners.”

This, of course, impedes direct relationships with – and knowledge of – value-chain partners and B2B customers. Olivine Technology, however, feels it has a solution in ASiM®, its multi-site sales and inventory management solution for SME manufacturers, distributors and retailers in the FMCG industry.

The technology networks a value-chain participant’s headquarters with its branches and mobile workforce, or with its value-chain partner, to enable automatic and real-time capture of sales and inventory-related transactions occurring anywhere, at anytime.

A distributor’s field salesman is able to use the ASiM® mobile application to perform field sales, with these transactions automatically transmitted in real-time to the headquarters’ ASiM® PC application.

The sales are automatically integrated and invoiced in the back-office application, while the value-chain partner, for example a manufacturer, receives real-time online analytics – based on the distributor’s data. A retail outlet can use the ASiM® mobile application to place a direct order with the distributor.

Mwaura said Olivine – a winner at the PIVOT East competition two years ago – has spotted a niche in that more traditional web-based multi-site sales and inventory management solutions lack the offline functionality required in Africa, where intermittent internet connection is the norm.

On the other hand, most SMEs cannot afford enterprise resource planning (ERP) solutions, especially when deployment for multiple users or multiple sites is required.

“They are also not user-friendly, and have superfluous functionality, for most SMEs, which almost certainly do not have the human resource capacity at their headquarters, let alone at their branches, to manage the change to ERPs or to support users,” he said.

On the other hand, ASiM® is designed to meet the needs of smaller companies while being affordable. It works on Android smartphones, tablets and PCs, and can work offline. It has automatic, real-time cloud synchronisation and backup, and integrates with the most popular back-office applications used by SME manufacturers, distributors, and retailers.

Olivine has been bootstrapping using funds from the co-founders, family, and friends, but is in the process of raising a funding round. Uptake has been strong.

“We have 20 customers with 300 users in all major fast moving consumer goods categories, including food, beverage, household, and cosmetics products. They perform 114,000 transactions worth US$4 million, on a monthly basis, on ASiM®,” Mwaura said.

Customers include Keroche Breweries, RIVA Petroleum Dealers, Distinct Group and Summer Africa, while official application development partners are SAP, Samsung, and Motorola.

“Our priority customers are SME manufacturers and distributors of FMCGs, who have a mobile workforce marketing channel, such as field salesmen, merchandisers, and their associated retailers,” Mwaura said.

“Currently, our customers are located throughout Kenya, but we aim to expand into the wider East and West African regions within three years.”

Olivine charges monthly user subscription fees of US$20-US$40 for manufacturers and distributors, and US$10 for retailers with five or more users, but Mwaura said it will be adding to its revenues streams next year via mobile B2B advertising and promotions, and mobile payments processing. He is ambitious for the future of the startup.

“Within three years, we expect to provide operational and marketing channel efficiency for 6,000 SMEs in Kenya, attain recurring annual profit of US$3 million, and expand into the wider East and West Africa regions,” he said.

Launching and building up a strong customer base have not been without their difficulties, with the first challenge being determining product-market fit.

“Mainly through pilots, we arrived at a solution that delicately balanced, on one hand, a compelling and economical value proposition for our SME customers, and on the other hand, an appropriate return on investment for us,” Mwaura said.

This was difficult to achieve, partly because customers were not inclined to purchase any software in the first place, let alone multi-site management solutions.

“In retrospect, a full understanding and execution of the lean startup strategy from our inception would have accelerated our growth much earlier on,” Mwaura said.

“Secondly, a dearth of working capital has often times seen us fall into the “Survival Trap”, where we have sacrificed long-term gains for short-term gains. For example, accepting large, seemingly lucrative, but risky jobs from corporate customers, yet our mission is to serve SMEs, who pay less in the short-term, but involve low risk, are more sustainable in the long-term, and are a much bigger market.”

Olivine, then, has now embarked on fully internalising lean startup principles, and is looking for US$500,000 in funding for further development, marketing and sales, and the recruitment of an accountant or CFO.

“The goals for further development are to all but eliminate customisations, and have “one system” for all our SME customers. Flexibility will be built into the system through user-configuration options,” Mwaura said.

Source Disrupt Africa