The FMCG supply chain works on an ever-evolving landscape with strategies for logistics and distribution planning undergoing transformative changes. In the last half a decade, the industry has experienced a surge in e-commerce and q-commerce volumes, and there is a greater emphasis on enabling a micro-marketing approach. With years of experience leading supply chains for consumer goods and consumer durables, Arpit Raj, Head of Logistics and Customer Service, Godrej Consumer Products Ltd. – has witnessed and adapted to these trends firsthand. In this interview, he shares insights into the many FMCG supply chain aspects that have made up and impacted his experience of the industry.
With reference to the FMCG sector, please elaborate on the strategies for logistics and distribution planning.
With the increased focus across FMCG organizations to enable better micro-marketing approaches through effective assortment, while creating a customized bucket for individual consumer segments, particularly with the significant increase in e-commerce/q-commerce volumes, the focus has shifted to creating a Digital Supply Chain Road Map which can transform/automate majority of the manual tasks/decisions that the value chain team is responsible for.
Logistics & Distribution/Inventory Planning has moved on from being a pure operation based function that only focused on ensuring supply of production lines and delivery to customers, to becoming an independent supplychain management function with clear ability to impact both the organization’s top line (through effective assortment/availability) and bottom-line (through optimization in Cost to Serve).
The vision should be to reimagine supply & logistics which is likely to create a solution which should be fit for the complexity of the business and the emerging needs of the consumer. The ideal strategy for an effective inventory planning is constantly re-evaluate and rejig your existing supply footprint in line with the changing customer base along with questioning the direct hub & spoke model, especially with the increased salience of the organized trade across the CPG sector.
Digital Technology enablers within the supply chain are the other levers which can help to significantly increase visibility not only across customers (to enable us to gather demand signals, predict consumer patterns, ensure effective assortment etc.) but also within the organization’s value chain & logistics network to ensure optimization of conversion/distribution cost coupled with increased visibility to track & trace inventory across stock points.
With 35 warehouses pan-India and a warehousing footprint of 14+ Lakhs Sq Ft, how do you optimize warehouse operations to improve inventory management and reduce operational costs?
Optimization of Warehouse Operations is a continuous process for us given the significant presence across India which we have been evaluating and enhancing through the following activities
Benchmarking & Upgradation – Constant understanding of the available warehousing inventory across locations with an understanding of our existing space along with possibilities of upgrading the same to a Grade A+/A warehouse has enabled us to significantly improve on the overall warehousing standard in GCPL. This has also enabled better infrastructure at an existing cost.
Creation of Mega Warehouses – Consolidation of space allows you to invest in Grade A facilities along with the ability to explore WMS/Vertical Racking simultaneously to reduce the cost significantly. Over the last 2-3 years, we have looked at significantly rejigging the warehouse footprint to ensure that we create bigger hubs that are likely to consolidate safety stocks at one location thus reducing overall inventory while significantly reducing operational costs through better infrastructure and possible automation.
Improvement in inventory storage – Reduction in wastages while ensuring block storage during interlocking of SKU inventory units on a pallet position helps to minimize area requirement. Customization of stacking patterns basis the individual case sizes/volume/weight helps you to ensure a correct way of storage for each SKU. Intra-warehouse classification of inventory basis the SKU-wise run rate helps you to maximize the overall throughput.
Effective TMS for primary transportation – A Transport Management System can act as another lever to better inventory management within the warehouse through Automated vehicle tracking and tracking dashboard along with the ability to select the optimum vehicle type to enhance utilization.
How to strike a balance between inventory levels and meeting customer demand, especially during periods of disruption?
In the case of the consumer goods industry, the cost/impact of carrying the inventory is usually lower as compared to the delta impact on account of lost sales (for most product categories but not always). Hence, the focus should always be to ensure fill rate maximization across channels/geographies/customers irrespective of the cost to serve.
This is an abridged version of the Interview published in the September edition of the Logistics Insider Magazine. To read the complete interview, click here.