Industry NewsProcurement & LogisticsSupply Chain

COVID 19 within the FMCG sector (Fast Moving Consumer goods)

From an independent perspective here at Wessex Distribution Limited we have refrained from making comments until the true picture has been portrayed during this pandemic.

It is noticeably clear that many businesses within the FMCG sector have been dealt severe blows by this caused by suppliers in other destinations but also the lack of contingency planning for procuring of products.

Pre-lockdown there was an explosion in purchasing of goods due to China being the main source of supply. The issue was clear to see that large batch sizes and long lead times meant that importers and distributors would soon be overstocked and have inventory levels eating into their cash reserves. In addition, the consumer was pulling stock from stores as panic started to show, commonly known as the “Bullwhip Effect “

Typical effect on spike in demand and long lead times v demand very reactive

The procurement teams have not investigated services provided locally or within the EU as it was always assumed that cost of goods was an issue. When you calculate cost of excess stock at wrong times Vs cost of goods, the margin has been eroded as warehouse storage costs eat into your profits and payments to suppliers become in demand.

Larger organisations that hold more than 500+ pallets per week would not really see an effect on their business until submitting yearly accounts. There are over 20% of FMCG business that reside in the SME sector that cannot procure smaller warehouse space. The SME must reduce stock holding to survive and not lose sales whilst doing so.

There are simplistic answers and there are over the top statements “let’s jump through hoops and look for sign off by different departments”. The latter seems to follow most businesses however if communication prevailed and egos did not, then the simplistic answer would in fact be delivered.

  • Can my warehouse pick small volumes for any sector of trade and deliver on time?
  • Procurement of core range 
  • Procurement of replacement products
  • Key suppliers that are flexible in batch size and shorter lead times 
  • Storage costs reduced stock holding to true demand with allowance for lead time. (Remember the shorter the lead time the less stock you hold)
  • Demand ,is this in SKUS/Case or pallet level or all three
  • Are my customers e-commerce or bricks and mortar
  • What’s the % split and where will it trend in 5 years?
  • Can my warehouse pick small volumes for any sector of trade and deliver on time?

We have a warehouse solution in place with a partner that supports SME in professional, simplistic process and flexible style and will be the future for this sector moving forward.  You do not have to be big in scale to provide good service.

Andy Logan MIOM CMILT

Leave a Reply

Your email address will not be published. Required fields are marked *