FMCGs: Can your supply chain handle the pace?
articles/2006/06/05/1991-fmcgs-can-your-supply-chain-handle-the assets/files/oldimages/2168-CATALYSTSteve-Barker.gif Ed Holden Jun 05, 2006 Critical Issues
The fast moving consumer goods (FMCG) sector brings with it a unique set of challenges for the supply chain. Steve Barker, Catalyst International, discusses the issues.
- Retailers want the right product, in the right place at the right time and at the lowest possible cost; and the cost for failing to fulfil orders is high. Contracts are won and lost depending on the quality and accuracy of service.
- So the FMCG sector lives and dies on the effectiveness of its supply chain. In a market where goods have a limited shelf life and perishables last only a matter of days, its essential that stock movements are timely and accurately tracked. Naturally, suppliers are turning to IT to make their supply chains more responsive to retailers demands, whilst working out ways to squeeze more costs out of the supply chain.
- High volumes and rapid turnovers are key characteristics of the FMCG supply chain and keeping track of stock is no easy task. Receiving goods, checking them in, storing them in the correct way and then checking them out again takes time and costs money.
- Applying the right strategy
- One strategy that the FMCG company and its logistics partners can adopt is to avoid goods ever entering the warehouse where possible and this is where network management, cross docking, dynamic sourcing and routing is becoming increasingly attractive in the FMCG supply chain. By receiving goods and shipping them out the same day, warehouses can dramatically reduce costs. The key, of course, is software that gives visibility of the opportunities to cross dock and can then set up and manage all of the required activities, within the transport schedules. In a cut-throat market like retail, this impact on the bottom line shouldnt be under-estimated.
- The FMCG supply chain is also particularly suited to RF data capture technology in the warehouse and the yard, given the high turnover of stock. By keeping tabs on goods both inside the warehouse and en-route to retailers, RF technology can help suppliers have a real-time and accurate picture of their inventory. This can help avoid write-offs, especially of perishable stock.
- Food manufacturers in particular are under pressure from the government to properly track goods leaving the warehouse in case the products need to be recalled. Batch-tracking from the end of the production line to its final destination will eventually require much tighter controls in the warehouse and this where RF data validation could prove to be something of a supply chain saviour by enabling a real-time update of what stock is where.
- Be flexible and responsive
- In addition, some retailers are raising the bar on how responsive an FMCG supply chain needs to be. As goods quickly move off store shelves, retailers are demanding fast replenishment by the FMCG supplier. By identifying daily or seasonal fast movers and getting the right stock in the right location within the warehouse, the picking process is speeded up and the warehouse optimised through dynamic pick faces. By using historical data and forecasting for peak times, suppliers are much more likely to be able to fulfil orders and avoid stock-outs at busy times.
- Stock-outs simply arent an option for suppliers. Neither are write-offs where stock has been lost or expired within the four walls of the warehouse. To combat this, many suppliers are moving beyond the traditional principle of first-in, first-out to think about first-expiration first-out. Again, this is an area where RF can play an important role in locating stock correctly and ensuring that companies can keep an accurate track of inventory.
- Retailers may drive the FMCG supply chain, but, they are themselves responding to customer centric strategies to win and retain high spending customers and IT is helping them to better serve their customers. A new trend is how the FMCG supply chain is being extended direct to customers with the rapid growth of Internet retail for FMCG goods like food and cosmetics. Online retail is associated with low prices and competitive delivery rates but fulfilling customer orders requires a slick supply chain and maintained stock levels.
- Whether its for an online audience or a traditional retail outlet, responsiveness and flexibility remain the hallmarks of a successful FMCG supply chain. To make sure the right product is in the right place at the right time, there needs to be cooperation across the whole of the supply chain. The only way to achieve this is to deploy truly integrated supply chain management systems that dont regard the distribution centre or warehouse as a link in the chain but an essential hub in improving customer service and delivery.
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- Steve Barker is vice-president, Sales & Marketing EMEA, Catalyst International. The company delivers world class supply chain software solutions that help enterprises in the retail, distribution, manufacturing and automotive aftercare sectors achieve significant efficiency, productivity and service improvements. The company is a SAP certified partner.
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