The severe rivalry in the FMCG industry has forced brand owners to go to fight. It has practically forced them to engage the fray to stay on top. Customization and tailor-made items are no longer the only ways to reach out to clients in today’s industry. Rather, it’s about quality, utility, and unrivaled features, as well as innovation, speedier deliveries, cost-effectiveness, and timeliness. Globalization and expansionist goals across globalized markets have changed the dynamics, and consumer goods corporations have gone into overdrive as a result. All of this has increased the complexity and sophistication of the supply chain system, which has repercussions such as previously unimagined volumes of inventory, a shortage of working capital for innovation, and lower earnings. In this article, we’ll look at some of the FMCG supply chain problems that companies must overcome to stay on top of their game.
FMCG Supply Chain Challenges
1. Inadequate infrastructure
Sound infrastructure is required for a successful FMCG supply chain system. Lack of a solid infrastructure results in outrageous increases in overall logistics costs, which have a significant influence on delivery and operational efficiency. Poor roads, an unbalanced transportation system, and a lack of technical help all offer significant challenges to the FMCG industry. It must be considered and addressed in advance.
2. Availability across all channels of distribution
The FMCG supply chain must ensure that items are available on store shelves 24 hours a day, seven days a week, using a variety of distribution channels. However, it is easier said than done because businesses must collaborate with a variety of stakeholders, including many warehouse chains, numerous retailers, and a plethora of customers. When they seek to optimize logistical costs while addressing availability issues, the problems get even worse. Although large packing saves shipping and packaging costs, it puts enterprises on the verge of losing market share. Smaller packs, on the other hand, cause these twin prices to soar, ensuring improved availability practically all of the time. As a result, FMCG companies are experimenting with new and inventive approaches to find a delicate balance between market penetration and logistic expenses.
3. The FMCG industry is dealing with tax issues
Another challenge in the FMCG supply chain is that tax rationalization is urgently needed since high taxes not only burden traders and increase logistics expenses, but also incentivize traders to smuggle commodities in and out of several states and across the country. This leads to different illegal activities such as human trafficking and tax evasion, resulting in low tax revenue for the government. India, on the other hand, is on the right route with the implementation of GST and the elimination of numerous unnecessary taxes.
4. Close collaboration and accountability
Real-time data improves visibility and aids FMCG supply chain partners and FMCG companies in making quick decisions and coming up with unique solutions to problems. Companies can keep a continual eye on shipments and receipts at all times thanks to these game-changing insights. It also enables them to adjust their planning and effectively utilize resources to meet the fluctuating demands. Close coordination between various FMCG supply chain sectors, such as suppliers, shippers, transporters, warehouses, and customers, is critical for smooth operations and greatly increases traceability.
5. Modern retailing’s ascension
Large departmental or discount chains in the West have amassed significant market share and have clout with FMCG businesses. They can demand large discounts from FMCG businesses due to their bargaining strength. Modern retailers in India, like those in developed economies, have been attempting to squeeze bigger margins from FMCG corporations to provide better offers to their customers. In India, unlike in the West, distribution margins are historically quite low. As a result, the FMCG sector in India finds it difficult to provide the kind of substantial discounts that modern merchants have demanded.
On the one hand, FMCG businesses will have to work around their existing stockists and distributors, which could lead to channel conflict. On the other hand, they must consider the whole distribution system’s impact of bigger discounts in modern commerce. Private label brands are anticipated to be introduced by more modern retail chains and pose a significant threat to incumbent producers.
6. Counterfeit goods are a threat
Due to its ever-increasing population, India has one of the world’s largest consumer pools. In today’s world of strong competition, cost, rather than quality, is a primary factor in attracting clients. Counterfeit product manufacturers have taken full advantage of this by flooding the market with a plethora of look-alikes that are merely pale imitations of their genuine and branded counterparts. Counterfeit products are harmful to businesses because they drain profits due to low sales and permanently damage their image. Furthermore, clients end up getting a raw deal because, even after paying money, they receive low-cost products that are rife with health and safety risks.
7. Entry of third-party logistics
Consumer goods companies now have a competitive advantage thanks to third-party logistics partners, who allow them to strategize and focus on their core operations rather than worrying about whether their products are reaching their intended customers. Companies can reorganize resources, allocate time, and streamline operations that require immediate attention in this way.
The Indian consumer goods sector, on the other hand, has a very erratic and unreliable sales pattern, which puts increasing pressure on these third-party solution providers. Despite these obstacles, 3PL partners appear to have established a thorough understanding of the Indian market and appear to have devised solutions to solve these concerns.
Indian enterprises must improve their FMCG supply chain performance if they intend to compete on a global scale. Taking lessons from companies in developed economies that have significantly improved their supply chain performance would be helpful to Indian firms. Whether national or global, supply chain management systems are extremely important to growing business and becoming competitive in the market.