As consumers, we all expect Fast Moving Consumer Goods to be there when we need them. With the demand for effective product flows increasing, how are logistics providers playing a critical role in keeping store shelves full?
The Rise of FMCG Logistics
Imagine turning on a tap only to find there’s no water. This flow, or lack of it, is equivalent to the movement of the thousands of relatively low cost products we use in our everyday lives being interrupted.
We depend on the continuous availability of fast moving consumer goods, FMCG, to keep our own refrigerators, and cupboards full to the point we can get through the average day – every day.
Short supplies and interruptions in the food and beverage, retail, pharmaceutical industries and other sectors that rely on fast turnover eventually hit us where we live.
Without sufficient buffer systems in place to guard against future interruptions, are we going to continue to experience these hiccups regularly?
Some would call these problems growing pains, others would see these problems as opportunities to create better FMCG logistics related workflows.
The FMCG Industry
By its very nature, the FMCG market is incredibly competitive. With margins that are already tight, suppliers are finding it harder to maintain their market positions due to ever increasing demands on delivery times and dubious availability of raw materials.
When viewed through a practical lens, this perfect storm of supply and “I want it yesterday” demand is as mentioned, an opportunity. To solve the problems, FMCG businesses are finding ways to leverage the high-level infrastructure of third-party logistics services: outsourcing appropriate elements of their sourcing, shipping, warehousing, distribution and fulfillment services.
Which Products are FMCG?
Fast-moving consumer goods include but are not limited to common items such as:
- Packaged food
- Cleaning and laundry products
- Personal care products
- Over-the-counter medicines
- Plastic goods
- In short, the majority of items you’d find in a national super-store.
Who Supplies the FMCG industry?
Major FMCG suppliers manufacture virtually any popular brand-name consumer goods product you can think of.
Here are just a few of the top suppliers in the FMCG industry:
- And many, many more
In 2019, the FMCG market’s biggest players reported revenues that had grown 3.9% from 3.4% the previous year.
If that doesn’t seem like much, let’s give you an idea of market size: the world’s top 40 FMCG companies alone generated a combined $1.13 trillion in sales for the 2019 fiscal year.
Further, according to Allied Market Research, the global FMCG market is expected to exceed $15 trillion by 2025.
Size of the FMCG Logistics Market
As of 2019, the global FMCG logistics market segment was valued at over $1 billion, and is expected to reach nearly $1.5 billion by 2027. From 2020 to 2027 the compounded annual growth rate has been projected to be 4.6%.
Luckily for ground based logistics companies, the roadways segment was the highest revenue contributor in 2019. When comparing modes of transportation, this accounted for over $43 billion, and is estimated to reach nearly $518 billion by 2027. That figures equate to a CAGR of 3.30% for the forecasted period.
FMCG and the Supply Chain
As we experienced recently at the tail end of the pandemic, any interruption in the hyper-sensitive FMCG supply chain sends shockwaves through the transportation industry. These delays ultimately manifested as empty store shelves and product shortages at unprecedented levels.
From a lack of truck drivers, to production shortages due to sickness, these ripples have been disastrous to the what should be a smooth flow of fast moving consumer goods from supplier through to consumer.
Alternative transport modes to support the global supply and demand changes are required to secure speed to market and to reduce the risk of delays. Regionalisation of supply and demand, with FMCG companies shifting their sourcing areas to markets where products are manufactured and sold.
Focusing on regional areas implies the use of experienced local logistics companies that know their own backyards intimately. These 3PL partners also leverage their networks to enable the wheels of local commerce turn more efficiently.
FMCG Demands Intelligent Logistics Processes
FMCG brands depend on their suppliers being key assets in their overall business strategy. Defining the value of a vendor at the granular level is incredibly difficult, but there are certain indicators that in practice, will always point the way to building better returns on investment.
Efficient logistical processes depend on these main factors:
- Operational effectiveness – a combination of consistency of supply and speed-to-market.
- A best price strategy – setting prices that allow both supplier and customer a reasonable sustainable margin.
- Sustainability – consumers are increasingly savvy to environmental issues, and adopting low impact processes is also favoured by many government agencies.
- Quality – maintaining consistent quality, especially during fluctuations in demand.
- Technical expertise and innovation – without innovation and the skills to make it happen we wouldn’t have modern the conveniences we take for granted every day – brands must innovate or die.
How Do 3PL Systems Help the FMCG Industry?
Some opinions would have you think giving up any part of the FMCG supply chain is a step backwards towards devolution.
While it would be ideal to wholly own and control every aspect from manufacture to consumer, not all FMCG companies have the resources to set up such operations. Alternatively, these smaller companies stand a better chance of survival by outsourcing logistics processes.
Moreover, consider some of these items with high turnover rates have limited shelf-lives and can lose their beneficial properties over time. In such situations, the agility offered by logistics centres offers more accessibility to those same products for timely and effective order processing.
From a boots-on-the-ground point of view, the implementation of WMS technologies maximizes control over logistics processes. This greatly reduces the risk due to errors and ensures delivery times are met.
A product’s traceability along its entire supply chain path is essential in the FMCG industry. The ability to monitor inventory in real time through WMS (warehouse managements systems) common to most logistics providers is quickly evolving into a much more comprehensive SCM – supply chain management system.
For more on how your company can benefit from logistical expertise and warehouse management services don’t hesitate to contact Brimich today.