Unlock the secrets to thriving in the competitive FMCG market! Discover five powerful strategies for optimising your supply chain and gaining a competitive edge. From data-driven decision-making to collaborative supplier relationships, this article has everything you need to stay ahead of the curve.
Optimise or perish!
In the crowded FMCG market, products are often commodities with interchangeable alternatives. The necessity to optimise supply chains is vital.
FMCG strives for but cannot command brand allegiance or clear differentiation against competition.
FMCG companies must accept that consumers are spoilt for choice. Their loyalty swings on factors such as
- price (who is on promotion this week?),
- convenience (off-shelf and the option of a few clicks and it’s delivered within a day),
- availability (how many different outlets range your products?).
Winning or losing the battle in FMCG is all down to who has the better operational efficiency. The ability to deliver goods on time, in full, and at the lowest cost is paramount.
Formula 1 is a good example.
F1 teams obsess over shaving milliseconds off their lap times. With the same obsession, FMCG teams must always pursue supply chain optimisation. Reducing the time taken and cost incurred is to gain a competitive edge. In FMCG, every second and every cent counts.
What are the strategies and tactics you need in FMCG to win?
Strategy 1: Data-Driven Decision Making
Data-driven decision-making is the future of FMCG supply chain management.
Proctor and Gamble (P&G) is one example of the application of AI data-driven decision-making. P&G blends supply chain optimsation with consumer behaviour analysis for product development. Their approach has been to collaborate with analytics providers. They are implementing AI-powered solutions (KNIME platform) for data integration and analysis. They also have real-time usage data from smart products. This gives insights into consumer behaviour for product development.
Supply Chains rely on collecting and interpreting data to drive the best outcomes. Faster data-driven decision-making in FMCG supply chains offers better;
- demand forecasting accuracy,
- optimised inventory management,
- streamlined operations, and
- improved responsiveness to market fluctuations,
- increased efficiency,
- reduced costs, and
- enhanced customer satisfaction.
Strategy 2: Collaborative Supplier Relationships
Collaborative supplier relationships add to supply chain optimisation efforts when they encourage;
1. transparency,
2. trust, and
3. mutual value creation.
Numbers 1 and 2 deliver better communication, joint problem-solving, and innovation. leading to improved supply chain resilience and responsiveness.
Number 3 leads to better costs.
A current example of this is Nestle. Their Responsible Sourcing Standard program aims to achieve 100% responsibly sourced raw materials by 2030. It fosters transparency, accountability, and sustainability. The program aims to establish a mutually beneficial relationship with its suppliers. The goal is to create a regenerative food system.
Transparency, trust, and mutual value creation are key in any supplier relationship. It improves communication and innovation. It also contributes to enhanced supply chain resilience, responsiveness, and cost-effectiveness.
Strategy 3: Agile Supply Chain Networks
Agile supply chain networks deliver supply chain optimisation by enabling;
- rapid adaptation to changing market conditions,
- fostering collaboration among stakeholders,
- facilitating real-time data-driven decision-making, and
- enhancing flexibility and responsiveness throughout the supply chain.
The current example of this in action is last month’s decision by Unilever to divest the ice cream business. It aims to simplify its operations, focus on core strengths, and drive productivity. The benefit is a less complex supply chain network. A flexible network can adapt to changing market conditions and demand fluctuations. Anything in the Unilever product range could go into the same warehouse and onto the same truck.
Unilever’s ice cream decision shows the importance of agile supply chain networks. Savings can exceed forgone revenue. Greater efficiency, adaptability, and sustained growth are critical in today’s FMCG marketplace.
Strategy 4: Inventory Optimisation
Inventory optimisation delivers supply chain optimisation when you’ve find supply chain nirvana. This is the state of having the right amount of inventory available at the right time and place.
The elusive state of supply chain nirvana delivers;
- minimised carrying costs,
- minimised stock outs,
- maximised customer service levels, and
- enhanced supply chain efficiency and performance.
Coca Cola is an example of an organisation whose products are available ‘everywhere’. They’ve taken extra steps to optimise their inventory. They focus on quality control, procurement management, and supply chain monitoring. It shows inventory quality and supplier performance enhances supply chain efficiency and resilience.
This isn’t meant to ignore the essentials. The classic tools in the inventory optimisation toolkit still work. They include techniques such as
- Economic Order Quantity (EOQ),
- Just-In-Time (JIT) inventory,
- ABC analysis,
- safety stock management,
- demand forecasting, and
- lead time optimisation.
These all target the reaching of supply chain’s nirvana.
Strategy 5: Technology Integration and Automation
Technology integration and automation simplify supply chain processes. They give instant insights and improving decision-making. Using IoT, RFID, and advanced analytics, organisations optimise in several areas;
- inventory management,
- demand forecasting, and
- logistics planning.
Automation reduces errors, boosts efficiency, and enables proactive problem-solving. This drives better customer service and competitiveness.
Amazon relies on technology and automation. They had 750,000 industrial robots working alongside its staff as of June 2023. If you lack Amazon’s resources, there are cost-effective options. These include
- barcode scanners,
- RFID tagging, and
- Transport and Warehouse Management Systems.
Big investment or simpler solutions. Either way, technology and automation will streamline your supply chain. It provides real-time insights and decision-making capabilities. You’ll tackle disruptions better regardless of the scale of your investment.
It’s up to you…
To survive in FMCG you must always optimise your supply chain. Operational excellence is key to success. By actioning strategies such as;
- data-driven decision-making,
- collaborative supplier relationships,
- agile supply chain networks,
- inventory optimisation, and
- technology integration,
…companies can drive efficiency, resilience, and growth.
FMCG supply chain professionals must embrace these strategies.
Leverage their power of innovation to keep ahead of the next disruption.
- What gaps do you have?
- How can you take action today?
- What can you do to safeguard your FMCG supply chain against tomorrow’s disruption?
