FMCG SUPPLY CHAIN MANAGING COMPLEXITY “Managing Complexity”: Managing complexity can be explained clearly with the help of following trends- 1) Increasing Number of Products and Services: With the increasing consumerism and competition among the organizations to attract more and more customers, customer has become more demanding and uncompromising. Companies are customizing products more and more to retain old customers and attract new customers, to fulfill increasing customer demand and gain competitive advantage over rival firms. This has led to the introduction of large number of new products with multiple SKUs which have very short life cycle. All these factors have led to increased complexity in supply chain which needs to be …show more content…
2) Large Number of Customers- FMCG products are large footprint products and have large number of customers. These large numbers of customers consume FMCG products in relatively smaller quantity, so last mile delivery is a challenge for producers. Producers need to have a distribution channel to cater to small demand of an individual customer. 3) Large Number of SKUs- Large number of SKUs in FMCG industry makes the products handling really complex. Keeping track of stock with large number of SKUs is a complex task. Receiving FMCG goods, checking them, storing them in the correct way and then checking them out again takes long time and costs huge money. 4) Faster Turnaround- FMCG products require faster turnaround due to shorter shelf life and seasonal demand of various FMCG products. This requires supply chain to be very agile and puts extra pressure on supply chain. 5) Wide Distribution Network- FMCG products are relatively low value products for which convenience of purchase is the fist criteria for buying. This creates a necessity for wider distribution network close to end customers. 6) Shelf Presence- Shelf presence and visibility of products is vital to FMCG products. Any Stockout results into loss of sales because customer is not willing to wait for these kinds of products and plenty of rival products are available in the market. So, timely supply of goods is very
DG has a current competitive advantage within its industry that is maintains through a unique cost-efficient approach. This low-cost structure is apparent through low inventories, low advertising costs, and location of stores in rural areas. Though profitable in the short-run, DG's current advantage is not
time in addition to inefficiently pricing the products. Let us look at each of these factors separately.
A supply chain is a net work of firms. Thus, each firm in the chain should build its own supply chains to support the competitive priorities of its services or products. Two distinct designs used to competitive advantage are efficient supply chains and responsive supply chains. Efficient supply chains work best in environments where demand is highly predictable. The focus of the supply chain is on efficient flows of services and materials keeping inventories to a minimum. The firm’s competitive priorities are low-cost operations, consistent quality, and on-time delivery. Responsive supply chains designed to react quickly in order to hedge against uncertainties in demand. Work best when firms offer a great variety of services or products and demand predictability is low. Typical competitive priorities are development speed, fast delivery times, customization, variety, volume flexibility, and top quality. Tables below show the environments and design features that best suit each design.
Supply chains manage the movement of products from the acquisition of raw materials through production and finally distribution to the end user. A properly designed supply chain can create many opportunities to drive down cost and increase revenue opportunities. In order to create a supply chain that is sustainable and flexible it is necessary to identify and align company goals and initiatives with the manufacturing and distribution of products.
FMCGs are products that have a quick turnover, and relatively low cost. FMCG products are those that get replaced within a year and they constitute a major part of consumers‟ budget in many countries. The FMCG sector primarily operates on low margin and therefore success very much depends on the volume of sales (Sarangapani & Mamatha 2008).
5. Opportunity – Certainly there is a good opportunity for buying cheaper products. Most goods are bought in large volumes and factories in poorer countries are compelled to offer cheaper prices to keep their factories running with that kind of bulk buying. DG does not require a factory to be Audited and certified for quality standards and social compliance. Their products are sourced from the lowest priced, low standard small factories based in rural areas that usually employ child labour. These factories are able to produce cheap items because they do not have to add additional costs of being a compliant factory. This results in cheaper items coming to their shelves and being passed onto an unsuspecting customer. Their introduction does not reflect their mission statement for the above given reasons in terms of : Respect, a better life for customers, superior returns for
17. The marked increase in product offerings, which allows for more customer choice, creates logistical challenges in terms of identification, storage and tracking. Another interface involves the amount of particular SKUs to hold. Marketers often prefer to carry higher quantities of particular items because this reduces the likelihood of stockouts. Product design is often the purview of marketers and can also have important implications for logistical effectiveness and efficiency.
For example customers wanted pineapples in Morrisons then the logistics manager will need to be able to respond to this demand quickly in order to satisfy the customer, even if the product isn’t available to the logistics manager they must be able to pull few strings in order to keep their customers happy and returning to them therefore logistics managers need to be able to keep up with consumers demands. If consumers demand a lot of apples then the logistics manager needs to be able to find a big supply in order to meet consumers demands to keep their consumers happy as apples are available all year around which means that they need to find sustainable sources and suppliers.
Within Logistics, there is a “Control Tower” and Distributor Connect” program that were with the intent to monitor all inbound or outbound activities within internal or external resources, it has since been able to effectively reduce deadhead moments. By bringing innovation into their supply chains to deliver better efficiency and lower cost, it is no surprise that P&G was ranked among the Top 5 in the award for Gartner Supply Chain Top 25. With the effective supply chain, it has help to keep hiking costs at bay, where P&G can price their product competitively; which ultimately spells benefit for the consumers.
To truly enjoy the understanding of such a large distribution channel I believe we need to start with the beginning of the process which is the suppliers. When it comes to purchasing power, no one is stronger than Walmart. With this purchasing power they are able to shape their suppliers the way they feel necessary. Walmart suppliers are required to use their just in time automation which ensures Walmart racks are always supplied but avoiding inventory. In the suppliers eyes, Walmart is a merchant that
2-Introduction 2.1-About FMCG Industry Fast Moving Consumer Goods (FMCG) industry is one of the fastest growing industries in the world, which consists of food as well as non-food consumable products. The volume purchased by end users is usually on a small scales and everyday use basis. This industry had suffered immensely during the global financial crises however, most of the companies conquered profitability and sales growth by 2010. These products are mostly available at supermarkets, chain stores, hypermarkets, grocery stores, etc. The
More efficient product and logistics by having to put a good deal of time and effort into making the production and logistics more efficient by reducing the number of production platforms, increasing productivity, reducing inventory levels and increasing delivery
After weighing the different options to improving the inadequacies of the TSC supply chain, we feel that a combination of both reducing the number of SKUs and reorganizing the direct shipments would help soften the demands of future growth the most. Before reducing the number of SKUs, It is important that TSC take into consideration which items offer the better gross margin return on investment (GMROI). In conjunction with knowing which items are more profitable and which items require the most inventory space in both the stores and the DC, TSC could start to eliminate inefficient SKUs. This does not mean eliminate a product offering altogether, if the company currently offers four different types of a single product, it would mean reducing the selection offered to customers. Increasing the number of products shipped directly to the stores would decrease the stress on the DC; however, TSC must take into consideration the stress of additional stores on the vendor shipping the product. TSC does not want the added stress to cause an increase in lead times, which could lead to more hole counts. That is why it would be important to systematically isolate the SKUs that require the most space in the DC, and focus on working with the vendors to reliably ship those products directly to the stores.Brad’s model predicts that the yard will reach max capacity as soon as next spring.
* Risk of having customers stock out our product if there is a disruption in the supply process.
„h It results in quicker delivery time due to the faster distribution cycle of products being shipped directly from the wholesalers.