Authored by: Vijendra Kargudri & Ashish Malik
In this Part-1 of a two-part blog on Optimize Resource and Route in the FMCG Industry using SAP TM, we will explore the emergence of FMCG industry and various challenges arising due to resource & route issues in the FMCG industry supply chain.
Emergence of FMCG Industry
The retail industry for Fast Moving Consumer Goods (FMCGs) has tremendously transformed over the past decade. The landscape of FMCG industry has witnessed ―the emergence of e-commerce from brick & mortar stores along with the changing nature of consumer behaviour. The dynamics of the FMCG industry supply chain necessitates it to constantly innovate, to optimally manage its resources & routes while meeting the increasing expectations of its consumers.
The FMCG sector generally includes a wide range of daily consumer product such as toiletries, dairy products, confectioneries, soft drinks, packaged fruits and vegetables. And, most of the FMCG products have a low unit cost, but driven by high volume transaction.
In the FMCG industry, supply chain performance is the key factor. As the industry continues to transform and supermarket giants up their ante to increase their market share, FMCG supply chain users confront several key challenges including cost optimization, meeting increasingly diverse customer demands along with ensuring availability & fulfillment of the same.
The industry is characterized by a complex distribution network and fierce competition, forcing the industry to work on supply chain innovations. Organizations with efficient supply chain system perform well, but those with inefficiently managed supply chains find the going tough to sustain or survive in the dynamic market scenario.
Supply chain challenges in the FMCG industry
Most of the FMCG industry suppliers need to manage large volume of diverse products and maintain fast rotation rates with its distributors. All this demands an agile transportation & logistics chain, with optimization of various resource & route across the FMCG industry supply chain.
Critical resource & route related issues on day-to-day basis lead to the following challenges in the FMCG industry supply chain:
- Unavailability of real-time information on product flows from production plant to warehouse, leading to fewer on-shelf products
- Mismatch of logistics & warehouse partners’ capability to accurately organize industry’s transportation & storage plans
- Failure to anticipate seasonal peaks and adapt to last minute changes to achieve year-round operational excellence, during promotional offer periods
- Transportation plans designed without environmental & social concerns across all operations, jeopardizing timely delivery and on-shelf availability of the products.
- Managing product availability in the complex distribution set-up
- Dealing with complex taxations & tariffs across geographies
- Dealing with counterfeit goods that offer as cheap alternative to original products
- Consumer loosing promotional benefits due to predatory Distribution Channel
- Improper transportation infrastructure and unplanned routes leading to delayed delivery
- Rising costs of distribution along with increase of online stores
- Wide variation in the last mile execution in retail
- Increasing number of SKUs resulting in complex assortment & channel mix strategy
- Substantial engagement for new age channels like modern trade, e-commerce and specialty stores
- Changing strategy to reach remotest markets effectively
In the following week, this Part-1 blog shall be followed by Part-2, wherein we will discuss how Krypt can help the FMCG industry optimize its resources and routes for the supply chain using SAP TM.
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