Coping with the challenges of indirect sales and distribution controlling in SMEs

The purpose of this article is to analyze problems involved in using a four‐tiered, indirect sales‐and‐distribution (S&D) model and describe how a manufacturing small and medium‐sized enterprise's (SME's) controller can master them.

The approach taken is an in‐depth case study of an Asian SME selling its homeopathic remedies through European wholesalers and retailers to geographically dispersed consumers.

The case study provides four main conclusions. First, entering into an indirect S&D relationship with wholesalers and retailers is just one more step along the road to outsourcing an enterprise's non‐core functions in a global economy. Second, as long as an SME is on this road, its controller must make the best of the situation and master the resulting complexity in the areas of sales and distribution. Third, above all, integrating business partners' wholesale and retail trade data into the SME's own management information system represents a major technical challenge. Fourth, presenting a clear, complete, and multidimensional overview of sales figures and inventory levels is a task likely to demand more time and attention in the future.

The research methodology employed here is descriptive, not explanatory. Because the study observes just one firm, it may not be representative of the general SME population. Moreover, much of the information collected is retrospective data and recollections of past events, which may be subject to problems inherent with memory or inadequate recordkeeping. Nevertheless, the findings form a foundation for better understanding the use of a four‐tiered, indirect S&D model.

While much of the literature explicitly or implicitly assumes use of direct S&D models, this article specifically addresses problems arising from an SME's employment of an indirect model and its loss of direct contact with consumers.