Supply Chain Management of FMCG companies

Supply Chain Management of FMCG companies

According to the World Economic Outlook by IMF the world's GDP grew by 2.9% in 2019 and is expected to grow by 3.1% in 2020. To further give a boost to this growth better Supply Chain Management is a necessity. When we are looking at today's market it is being driven forward by digital technologies such as Artificial Intelligence and use of softwares such as Enterprise Resource Planning (ERP) to provide companies the digital edge. When we are looking at the Supply Chain Management in the modern world it has to deal with increased customer expectations. Also, looking into the factors of excelling in ensuring the right demand and supply chains companies have to look for increasing their market and at the same time ensure the customer base expansion. In particular, when we are looking into the aspect of Supply Chain Management of FMCG companies, they have to particularly focus on ensuring timely delivery to customers while maintaining an inventory level which will ensure reduced cost.

Looking at the Fortune 500 companies, it can be observed that the companies have continuously focussed on logistics and freight to remain at the top. Also looking at the FMCG sector there is a huge scope for improvement in the Supply Chain. With the freight transportation rates being optimised and huge investments in infrastructure by governmnets all around the world, the practice of Supply Chain Management has tremendous opportunities in the coming future.

                                                                                                    

Looking at India, with the government huge emphasis on infrastructure and ease of doing business, lots of investment are needed in the supply chain of companies. The Indian FMCG sector is a low-margin business where volume holds the key to success. With domestic consumption close to USD 17 billion, the FMCG sector today is one of the largest in the country and accounts for about 14.5 per cent of the GDP. In current global slowdown, increasing uncertainty in demand and supply, changing customer preferences, and shortening of product life cycle besides rigorous competition from multinational companies, this sector has been forced to reconfigure their supply chain strategy for their survival and growth.

The fast moving consumer goods (FMCG) sector is the fourth largest sector of the economy with the  size  of  about  more  than  Rs  500  billion.  FMCG sector generally includes  a  wide range of frequently purchased consumer product such as soaps, dairy products, confectionary, soft drinks, fruits and vegetables and batteries. FMCG products usually have a low unit cost but large volumes. Top ten FMCG companies in India consist of both global players such as HUL, Nestle, Cadbury, P&G and Indian companies such as Amul, Asian Paints, Dabur etc. In the FMCG sector the  supply  chain  performance  is  a  key  factor.  The FMCG industry  is characterized  by  complex  distribution  network  and  intense  competition  forcing  firms  to constantly work on supply chain innovation. Companies with better supply chain system will perform well, whereas  those  with  poorly  managed  supply  chains  will  find  it  tough  to  even survive in the competitive market.

Because of the complex taxation structure, it is difficult to treat India as one market. Varying local  tax  structures  across  states  encourage  traders  to  indulge  in  the  smuggling  of  goods across states, leading to  the creation of grey markets. Experts are of the  view that smuggled goods  account  for  about  15  percent  of  the  total  goods  flow.  Such  activities  distort  the  plans and  activities  of  FMCG  companies.
Traditionally  most  companies  have  been  managing  all  logistics  activities  themselves  so  far the logistics sector in India has lacked professionalism. The new players are still to learn a lot about Indian conditions and also are not in a position to offer economies of scale. Hence they will be of value only to new MNCs and FMCG players who operate in the mid volume high variety  segment  of  the  market.  Established  FMCG  companies  like  Nestle  and  HUL  are unlikely  to  use  their  services  as  logistics  solution  providers  as  they  are  not  likely  to  be  cost effective. The problem gets compounded further because most Indian FMCG companies have skewed  sales  patterns  that  place  huge  demands  on  service  providers  in  the  last  week  of month.  Thus  service  providers  are  not  in  a  position  to  manage  their  resources  effectively. Over  a  period  of  time  these  3PL  companies  will  develop  an  understanding  of  the  Indian market and also the relevant capabilities necessary to handle these markets. This will enable them to bring down their costs and to provide cost effective services to even large players like HUL.

Ensure permanent on-shelf product availability  You need access to accurate information on product flows at all times during product transfer from production plant to warehouse, or to the end customer. Reliability of tracking and alert information  is  crucially  important  to uninterrupted  goods  supply,  enabling  you  to  anticipate and implement backup solutions whenever needed. NWCC meets your demanding needs here by  offering  high-performance  information  systems  and  real  time  supply-chain  traceability utilities.  Optimize costs and investments  Optimization of costs and investments is a matter of priority and has to be factored in along with  your  production  needs.  So  you  expect  your  logistics  partner  to  provide  advice  and strategic  intelligence  on  the  organization  of  your  transport  plans  and  industrial  processes  at logistics  sites.  You  can  count  on  the  experience  of  NWCC  to  help  you  optimize  your investments and achieve continuous improvement.


References
1. http://managementstudyguide.com/supply-chain-management-definition.htm
2. Douglas  M.  Lambert, Martha  C.  Cooper, Janus  D.  Pagh,  (2018)  "Supply  Chain Management:  Implementation  Issues  and  Research  Opportunities", The  International Journal of Logistics Management, Vol. 9 Iss: 2, pp.1 – 20
3. Cox   ,   (1996),   Relational   Competence   and   Strategic   Procurement   Management, European  Journal  of  Purchasing  and  Supply  Management,  2,  pp.57–70.  Deveshwar and R. Rathee (2017), Challenges for Supply  Chain Management in Today‟s Global Competitive Environment International Review of Business Research Papers, Volume 6. No.
4. CSCMP  &  A.  T.  Kearney.  Creating  Competitive  Advantage  through  the  Supply Chain: Insights on India, CSCMP India, May 2017.