Businesses and their essence have shifted from ancient resolved approaches of profit generation to client orientation and supported cooperative methods across the global market. Supply chain has evolved from a linear strategic model to a more dynamic one, requiring continuous knowledge sharing and knowledge visibility across the network; in addition to a real time cognitive process.
The Fast-Moving Consumer Goods business typically functions on the principle of high volume and low margins. As per Indian Brand Equity Foundation’s report published in August 2019, FMCG is the fourth largest business within the country and accounts for Rs 3.4 lakh crore (US$ 52.75 billion) of revenue. The FMCG sector consists of an array of merchandise starting from detergents, soaps, toothpaste, shampoos to food merchandise, confectionary, beverages, cigarettes etc. The buyer generally doesn’t stock these goods as they're perishable in nature and that they favour to buy them as and once they need.
The need for a robust Supply Chain in the FMCG sector:
Given the nature of the FMCG industry, the foremost factors of success are the ability to make, style and execute a strong distribution network. Accessibility and proximity are crucial for wider penetration. It takes herculean effort to not only put together a powerful network of stockists, retailers, but additionally improve their productivity and price. To serve your client, it's vital to develop solid partnerships among your Supply Chain.
This has a direct impact on your end consumers, whether you're managing a supplier manufacturer or distributor. Effective communication can increase potency and productivity.
According to an Invest India article, dated 1st July 2019 business houses like Patanjali and RP-Sanjiv Goenka Group are planning to expand into new geographies. The FMCG business is on a high growth curve, also the overall demand is predicted to multiply manifold within the coming years. The Indian retail market is going through serious modifications. All major businesses currently realise that they have to reconfigure and realign themselves to be able to cater to the current growing curve.
There are off springs of this growth and they can be generally classified as:
1. Coordination of varied varieties that the manufacturer has.
2. Realigning to the newer channels
3. Managing the reach
Even though these appear like major challenges, the fact that 12.2% of the world’s population belongs to the villages of Asian nations cannot be ignored. 35% of the revenue of the FMCG sector comes from the rural market. Ernst & Young’s research on the cities of India highlights the emergence of 30 ‘new wave’ cities such as Jaipur and Surat. Consumption in these cities has surpassed those of many major metros. With the technological wave, India’s youth is exposed to better internet connectivity and smart phones. India’s young population is also characterised by a high degree of technological awareness. This has led to a growth in the E-commerce sector, which is projected to contribute 11% to the FMCG sales. This has been a major catalyst in expansion and enlargement of the rural market.
The above-mentioned facts make it imperative to faultlessly visualise and implement a good supply chain. The supply chain style for any FMCG product must take into thought higher transport facilities to cater to the current urban as well as rural population.
Managing a supply chain in the FMCG:
A FMCG Product commonly goes through the subsequent sequence, before finally reaching the end user.
Even though this is as ancient as it can get, no business can work without taking some pointers from the Digital Revolution. Supply Chain is extremely advanced in nature and has innumerable internal processes like procuring, purchasing, inventory management etc.
Despite this, the dynamics of demand and supply, shifting consumer preferences and cut-throat competition has pushed major corporations to reconfigure their supply chain methods.
As per a research paper published by the Management Development Institute of India, the FMCG sector has realised and is focusing on demand management. To manage a supply chain of any FMCG product it is extremely important to correctly forecast the demand to fulfil customer satisfaction without compromising on the set service level. This will not only help in maintaining the bottom line but also deliver superior numbers for the same. An advanced system for warehouse management, newer approaches to product distribution can reduce delivery times. A Mckinsey & Company report says, companies must buy individual supply chain functions so that they can increase distributor agility, in turn reducing turnaround time for the product to reach the consumer.
Supply chain management in metropolitan areas has a lot to do with instant decisions. For example, a firm will arrange to transport the merchandise via railways, roadways, airways or in some case even water channels. A good supply chain can modify the firm to attenuate the value, maximize returns, match the availability to the demand and ultimately satisfy the purchasers. All internal activities should be faultlessly coordinated with automatic workflows and unobstructed sharing of real time data across the chain among all partners. High growth of the FMCG industry goes beyond increased spends and rapid urbanisation. There must be digitization of any supply chain. It will lead to clear definition of goals, new capabilities and a conducive environment.
An intelligently and thoughtfully designed supply chain in this booming FMCG industry will lead to reduced lead times, higher customer satisfaction levels and opportunities for new entrants in the FMCG and the supply chain domain.