The overwhelming competition in the FMCG industry, also known as Fast-Moving Consumer Goods, has put players in a ‘survival of the fittest’ situation. In the present scenario, it is not just about tailor-making the products to suit the customers’ needs, but the deciding factor of your success in the market is the ability to reach customers before your competitors do. Furthermore, emerging markets have opened up new doors of opportunity for FMCG companies. So, it has become crucial for businesses to identify different supply chain strategies to reach out to these customer segments effectively. Also, consumer goods companies are increasingly embracing globalization. This has not only sparked complexity in the supply chain and other processes but has also bloated inventory levels, depleted the working capital requirements for new products, and reduced margins.
There are several issues that FMCG companies need to address to align the current demand and supply requirements. Here, we examine some of the critical supply chain challenges that players dealing in consumer goods need to beat for the smooth flow of operations:
1. Lack of end-to-end visibility and collaboration:
The consumer goods marketplace today is complex, outsourced, and highly volatile. Therefore, it has become essential for FMCG companies operating in this space to have multi-tier visibility to address this challenge and make forecasts and orders visible sooner. This strategy would also facilitate bi-directional collaboration between partners. Having real-time data on actual shipments and receipts, and insights into stock-in-transit and point-of-sale (POS) information, gives brand owners the ability to alter their supply chain as per the requirement and proactively manage volatile demand.
2. Product innovation and fulfillment within the supply chain:
With a wide range of options available in the market, what makes a brand stand out from the rest in the customers’ eyes is their ability to differentiate themselves from the competitors. Moreover, believe us when we say that there is no better way to grab more attention from the customers. However, often players in the FMCG space find difficulty in incorporating innovative product design, manufacturing, and fulfillment within the existing supply chain. Maintaining close coordination with contract manufacturing partners around product specifications, formulations, and POS packaging can make product launches easier for brands.
3. Conflicting key performance indicators:
Business intelligence integrates data across the entire value chain to provide unique insights into demand patterns, operations, and customer service requirements. However, to make the most of these powerful insights, top players in the supply chain must be aligned in terms of what is being measured and the tools that are being used to interpret the information. The key to effective supply chain orchestration and risk management is having a shared planning and execution process combined with the right business analytics that gets everyone in sync.
4. Inability to synchronize supply chain tiers:
Demand planning and coordination across multiple supply chain tiers are requisites to ensure that the right products are delivered to the right locations at the right times. This also forms an essential factor in committing customer order requirements. Many companies are still unable to strike coordination between supply and demand because they do not have access to timely, accurate data from their supply chain parties. They often tend to settle for snapshot data dumps from online portals that lack real-time intelligence and the ability for closed-loop execution of activities.
5. FMCG:
Fast-moving consumer Goods are characterized by high demand, cheap cost, frequent use, quick consumption, and are designed for frequent use. They have high availability, are purchased frequently with low buying effort, have low cost, rapid consumption, high turnover rate, and are highly distributed. They are non-durable, consistent in form, size, color, and price, and belong to categories such as Food and Beverages, Personal Care, Healthcare, and Home Care.
6. Challenges:
FMCG supply chain faces challenges such as fierce competition, the need for quicker deliveries, cost-effectiveness, timeliness, maintaining quality, utility, and introducing innovative features to stay ahead. Globalization and expansionist objectives lead to complexity and sophistication in the supply chain system, impacting inventory levels, working capital, and profit margins.
7. Logistics:
Inadequate infrastructure, logistical challenges, bad roads, an imbalanced transportation system, and the lack of technical assistance hinder operational effectiveness. Availability across all channels of distribution, including shop shelves, retail chains, warehousing companies, and direct clients, is crucial. Optimizing logistical costs is essential for gaining market share.
8. Consumer Goods Corporations:
FMCG industry and brand owners emphasize customization, tailor-made items, quality, utility, unrivaled features, innovation, speedier deliveries, cost-effectiveness, and timeliness. Globalization and expansionist goals drive these corporations to operate in globalized markets, leading to complexities and sophistication in the supply chain system, affecting inventory volumes, working capital, and earnings.
9. Distribution Channels:
FMCG supply chain relies on distribution channels involving stakeholders like warehouse chains, retailers, and direct customers. Optimizing logistical costs, gaining market share, utilizing large and small packing sizes, and implementing novel and inventive approaches are critical strategies. Tax issues, including rationalization, high taxes, and logistics expenses, are challenges that need attention.
10. Counterfeit Goods and Competitive Advantage:
Counterfeit goods pose a threat to the FMCG industry, affecting the consumer pool and creating competition based on cost, quality, and imitations. Genuine and branded counterparts are essential to avoid harm to businesses, low sales, image damage, and health and safety risks. Implementing third-party logistics can provide a competitive advantage by focusing on core operations and intended customers, reorganizing resources, and streamlining operations.
11. Erratic Sales Pattern and Market Penetration:
Erratic sales patterns in the FMCG industry create pressure for businesses. In the Indian market, solutions involve optimizing supply chain performance, learning lessons from developed economies, and adopting national and global supply chain management systems for growing business and maintaining market competitiveness.
Conclusion:
Indian enterprises must focus on supply chain efficiency, optimize logistics, and learn valuable lessons from both developed and emerging economies. Implementing robust supply chain management systems can contribute to business growth on both national and global scales.
