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:

• Beverages
• Packaged food
• Toiletries
• Cleaning and laundry products
• Personal care products
• Over-the-counter medicines
• Stationery
• 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:

• Nestle
• P&G
• Pepsico
• Unilever
• Coca-Cola
• L’Oréal
• Danone
• Heineken
• And many, many more

Top FMCG Suppliers

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.

Modes of Transportation and Projected Growth

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.

Source: https://www.maersk.com/industry-sectors/fmcg

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.

A well managed, data-driven supply chain system provides visibility from end to end for monitoring the flow of goods, services, and information from procurement to manufacturing, and final delivery to the end consumer.

The saying, “what can be measured can be controlled’ implies that data plays a critical role in manifesting real-world benefits of an effective supply chain. But the truth is there are many other essential factors which include:

• Securing the right logistics partners
• Effective cost control
• Good vendor and supplier relationships
• Adopting innovative supply chain technologies.

Simply put, an optimized and effective SCM offers numerous benefits that improve a business’s bottom line.

Let’s have a look at eight of the most appreciable benefits of effective supply chain:

1. Reduced Overhead

More accurate predictions for demand can reduce the overhead costs associated with slow-moving inventory storage.

Stocking less slow moving inventory makes room for higher-velocity, revenue-producing inventory.

Because the necessity of warehousing contributes to overhead, reducing these costs by optimizing your layout, or adopting the right automation solutions can improve productivity and result in a better inventory management system.

Identifying other unnecessary expenditures is another way to achieve lean operation. If your small business is facing high logistics costs, switching to a more efficient provider offering comparable services and quality at a lower cost is a quick win.

2. Better Integration

According to Oracle, 76% of companies lack an automated flow of information across the supply chain.

If information flow is a stumbling block for companies, companies will suffer fragmented information which results in lost sales opportunities.

Implementing software solutions to remove bottlenecks and allow seamless sharing of information provides a big-picture view of the supply chain from end to end.

Thanks to improved data access and warehouse management systems, supply chain leaders have the information they need to make more informed decisions.

3. Greater Control Over Quality

When issues with quality come up, the results can manifest in significant costs for companies. According to the rule of 10, the cost to replace or repair an item increases by tenfold at each step of the progression.

As long as an equitable agreement is in place that does not drive margins into the ground, companies that have greater control over their direct suppliers, and their suppliers’ suppliers, benefit from improved quality control.

Implementing a standard minimum quality criteria plan enables direct suppliers to identify and partner with secondary suppliers that meet those requirements.

Likewise, process guidelines and SOPs can help suppliers comply with your company’s quality requirements.

Some companies go beyond simply providing criteria and take the extra step of conducting periodic audits or requesting documentation verifying suppliers’ compliance.

Arshad Hafeez, a global expert for Supply Chain Management and Quality Control, recommends implementing a Management Operating System (MOS) for monitoring key performance indicators including:

• Suppliers scrap rates, reworks and similar issues
• Final product quality (as received by end customers)
• On-time delivery
• Time for complaint resolution
• Supplier quality assessment findings

By analyzing these data points, companies can partner with the highest-performing, best-suited vendors and suppliers to maintain strict quality control thus keeping end users happy.

4. Higher Efficiency Rates

Benefits of an effective supply chain include real-time reporting on the availability of materials and manufacturing delays.

This allows companies to implement backup plans. Things like useful data points on sourcing materials from a backup supplier which can prevent further delays.

Without real-time data, companies can’t initiate a plan B effectively, resulting in problems related to out-of-stock inventory or late shipments to end consumers.

Implementing smart automation also results in higher efficiency. Investing in the right solutions and leveraging data to minimize delays supports a positive customer experience, plus it boosts your company’s reputation.

5. Keeping Up With Demand

“If consumer sales increase by 5 percent in a given week, a retailer could end up ordering 7 percent more product in response to the increase and a feeling that demand will continue,” cited in a report by VISA.

“The next link in the chain, observing what appears to be a 7 percent increase in demand, then orders a larger increase on his supplier. Eventually the factory may observe an inflated 20 percent increase in orders.”

This phenomenon, known as the bullwhip effect, often results from a lack of efficiencies in communicating supply and demand changes. Supply chain leaders with access to real-time, accurate information can better predict demand.

By being more nimble, they can adjust readily to demand and be more agile in reaction to changing market conditions therefor avoiding the bullwhip snap-back.

6. Better Risk Mitigation

Analyzing big-picture supply chain data at a granular level can reveal potential risks. This enables companies to put a Plan B in place to respond to unexpected circumstances.

By taking proactive action, rather than being reactionary, companies can avoid the negative fallout from quality control issues or other concerns as they arise.

Understanding risks also helps companies achieve leaner operations, and as mentioned previously, reduce overhead.

As an example, 87% of companies surveyed believe they could reduce inventory by 22% if they had a better understanding of risks in their supply chains.

7. Optimized Shipping

An article from Logistics Management, The State of Logistics Report, cited that:

• Freight transportation costs increased by 7% from 2016 to 2017
• Private and dedicated trucking costs increased by 9.5%
• Less-than-truckload costs rose by 6.6%, and
• Full truckload costs rose by 6.4%.

Because of  rising costs, shipping optimization is a priority for supply chain leaders.

Identifying efficient shipping methods for small parcels, large bulk orders, plus various other shipping scenarios, results in companies getting orders to customers faster while at the same time minimizing costs.

These cost savings boost the company’s bottom line. They can then be passed on to consumers and help to improve customer satisfaction.

8. Streamlined Cash Flow

Supply chain disruptions have a domino effect impacting every segment of the supply chain.

Working with reliable suppliers not only means fewer disruptions and more satisfied customers, they also improve the company’s bottom line.

Improved cash flow by allows you to invoice (and get paid for products and services) sooner. Implementing more cost-effective solutions eliminates wasteful spend and reduces overhead pressure thereby contributing to a more positive cash flow.

In Conclusion, Better Efficiency Is A Matter Of Studying The Details

Knowing the key touch-points and critical data metrics in your supply chain provide insight into the fluid nature of your business.

All benefits discussed above allow companies to make overall smarter decisions such as choosing the right partners, accurately predicting and responding to market demand changes, and reducing supply chain disruptions.