The fierce competition in the FMCG sector has placed the brand owners on a war footing. It has virtually compelled them to enter into fray to stay atop. Today’s marketplace is not just about customisation and tailor-made products nor is it about reaching out to customers. Rather, it is more about innovation, faster deliveries, cost effectiveness, timeliness alongside quality, utility and unmatched features.
The emergence of globalization and expansionist ambitions across globalised markets have changed the dynamics and it has indeed led consumer goods companies to go into overdrive. All of it has introduced more complication and sophistication in supply chain system which at times has certain ramifications like unprecedented levels of inventory, lack of working capital for innovation and lower profits previously unimagined. Here, in this article, we will dwell upon some of these challenges that companies in the FMCG sector have to fight off to stay on the top of their game.
Availability across distribution channels
The FMCG sector has to ensure on-shelf availability of products by 24×7 across myriad distribution channels. However, it is easier said than done as companies have to work together with various participants which includes multiple chains of warehouses, numerous retailers as well as umpteenth customers. Problems get compounded when they begin to optimize logistics costs while meeting availability challenges. Though big-sized pack reduces the transportation and packaging costs nevertheless it pushes companies on the brink of losing market penetration. On the other hand, small-sized pack causes these twin costs to skyrocket, thereby, ensuring better availability almost all times. Therefore, consumer goods companies are working hard to strike a fine balance between market penetration and logistic costs by adopting new and innovative methods.
Taxation woes for FMCG sector
Rationalization of taxes is the need of the hour as hosts of high taxes not only burden traders and incur huge logistics costs but also, kind of, incentivise traders to smuggle goods in and out of many states and across country. This leads to various malpractices such as trafficking and tax evasion subsequently it results in meager tax contribution to the government. However, with the introduction of GST and abolition of many superfluous taxes, India is setting itself on the right track.
Threat of counterfeit goods
India is home to one of the biggest pools of consumers globally thanks to its ever-increasing population. In the age of fierce competition, cost plays a major role in acquiring customers other than quality. Taking full advantage of this, counterfeit products manufactures have flooded the market with many a look-a-like which are just pale imitation of their genuine and branded counterparts. Counterfeit products have detrimental effect on companies as it guzzles their profits on account of low sales and dent their image irrevocably. Moreover, amid all this, customers end up getting raw deal as even after paying money, they get cheap products fraught with many health and safety hazards.
Lack of proper infrastructure
An efficient supply chain system can’t do without sound infrastructure. Lack of robust infrastructure leads to exorbitant rise in overall logistics costs which seriously impact the performance vis-a-vis deliveries and operational efficiency. Issues like poor roads, skewed transportation system, lack of technological assistance pose a mammoth challenge to FMCG sector. it must be factored in beforehand and taken care of.
Entry of third-party logistics
Third-party logistics partners have provided a further competitive edge to consumer goods companies as they can strategise and focus on their core businesses rather than worrying about whether their products are reaching the end customers are not. In this way, companies can shuffle resources, allocate time and streamline operations that need immediate attention. However, the Indian consumer goods market experiences a very volatile and unsteady sales pattern which eventually puts mounting pressure on these third party solution providers. Having said that, braving these challenges 3PL partners have developed an in-depth understanding of the Indian market and seem to have equipped themselves with strategies to address these issues.
Close coordination and traceability
Availability of real-time data enhances visibility and assists supply chain partners as well as FMCG companies in quick-decision making and finding unique solutions to the problems. Leveraging from these game-changing insights companies can keep constant watch and locate shipments and receipts at every point. It further enables them to alter their planning and utilize resources effectively to meet the volatile demands. More importantly, closed coordination between various participants such as suppliers, shippers, transporters, warehouses, customers of supply chain is vital for smooth operations and improves traceability manifold.