Combating the hurdles of FMCG Supply Chain in times of COVID

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While the COVID-19 pandemic has changed consumer behaviour and rapidly increased the demand for household items and grocery items, it has also shown the segment some tough times by forcing companies to step out of their comfort zone as traditional distribution mechanism came to a screeching halt. In the following story, we shed some light upon the difficulties faced by the sector, the rise of e-retail, the technological adoption by the sector, and much more.

Fast-moving Consumer Goods (FMCG) is the fourth largest segment in the Indian economy. The segment which includes food and beverages (19%), household & personal care (50%), and healthcare (31%), amidst the outbreak of the COVID-19 pandemic, witnessed a major impact.

The sector was seeing a slowdown since mid- 2018, with growth rates steadily declining for the past 15-18 months. However, the shift in consumption patterns of consumers during the COVID pandemic has increased the demand for household and grocery items. According to Nielsen, the Indian FMCG sector amid the COVID-19 is likely to grow about 5-6% in 2020. While the sector put up a brave fight during the course of the pandemic, it also had to dodge its share of challenges and swiftly drive the supply chain seamlessly during these unprecedented times.

STORMS BRAVED BY THE SECTOR DURING COVID-19

With demand for essential products shooting up, companies across the globe were scrambling to streamline their supply chains to secure immediate operations along with dealing with the grass-root issues caused by the nation-wide curfew.

Since the outbreak of COVID-19, safety and immunity have surfaced as the two prime concerns of consumers and it is likely to stay the same for more than six months, says a report by Nielsen. This behaviour is corroborated by high and accelerated sales growth of evolved hygiene categories like liquid toilet soaps, and immunity-boosting categories like Chyawanprash & Branded Honey.

“The FMCG industry particularly the food, groceries, and health &
hygiene products showed an unusual surge in demand due to panic buying. Retailers were under confusion as to how to manage social distance & hygiene. The demand for home delivery increased many folds,”

Mihir Mohanta, General Manager (SCM), Mother Dairy Fruits & Vegetables

While the FMCG sector was fighting tooth and nail to meet the heightened demand caused by the panic buying of the consumers, it was also facing issues such as the shutdown of production due to confusion, non-availability of raw material, lack of cash flow and manpower, etc.

FMCG manufacturing facilities were constrained to operate on 50% manpower, manage hygiene & sanitation, and manage employee movement. Many of the workers refused to come to work out of fear
of safety or migrated back to their hometowns,” shares Mr Mohanta.

Furthermore, driver availability, border sealing, movement restriction, non-availability of return load and also food for the drivers while on the road also caused havoc in the supply chain.

“Above-all, nation-wide uncertainties on the fast-changing market and operational scenarios were observed .What works in one state may not work in another, rather within a state what works in a city, may not work in another city… even government authorities, at times, were unclear on the recent government orders or notifications, It’s a never seen complexity by the whole world, with still no one knowing how long this situation will continue.”

Sanjeev Khanna, Sr VP operations at Patanjali Ayurveda

Apart from this, visibility of data and tracking of efficiencies in the entire value chain emerged as a prime hurdle.

With the lack of technological advancements in the sales process, the sector also suffers in optimising inventory and warehouse management along with utilising the consumer’s purchasing preferences to make selling decisions.

Also, people visiting the stores decreased drastically during COVID and resulted in the rise of e-retail, this further brought up hurdles for the ones lacking in technological adoptions.

RISE IN E-RETAIL

Amidst the outbreak of the pandemic, consumers in cities are preferring home delivery over in-person visits to the neighbourhood or department
stores, and are consciously minimising interactions through ‘contactless’ options.

Understanding the shift in consumer demand, the FMCG companies have now started to shift towards e-commerce platforms.

The growing preference was further facilitated by food aggregators’ delivery arms collaborating for consumer product delivery.

According to the 5th edition of COVID-19 Evolving consumer trends report
by Nielsen, the topmost management of certain FMCG companies said that there will be more focus on e-commerce going forward, while a majority
of them said that their focus will be more on improving last-mile delivery in the coming six months.

“With the surge in demand for packaged foods and personal hygiene products, companies have set up teams, created links with hyperlocal
delivery partners, and helped get their products to stores. COVID also prompted firms to ramp up supplies online and forge tie-ups with
hyperlocal delivery partners and even assist retailers by opening up helplines as the lockdown crippled the movement of goods. Firms
started partnering with local food-delivery companies like Zomato, Swiggy, etc. to deliver groceries to customers.”

~Alexandre Amine Soufiani, Managing Director & CEO, FM Logistic India

“Necessary is the mother of invention. This pandemic has given us a lot of things to learn from these issues and we are now going to adopt those platforms where we can get the advantage and pass it on to the others for enhanced visibility.”

~Anil Kumar Mishra, National Logistics Head, Pladis Global

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