Definition of FMCG Products
The Fast Moving Consumer Goods (FMCG) industry is regarded as a quick and agile industry that deals with a wide variety of goods. It mainly comprises of non-durable products that fulfill the everyday needs of the customers. The characteristics of the FMCG products are that they are non-durable, branded, packaged and consumed regularly on a monthly basis. The FMCG products can be categorized in the following manner: packaged food products and beverages, personal care, household appliances, alcohol and tobacco, and personal care products (Bala, Prakash and Kumar, 2010). The SWOT analysis that was conducted in this industry shows that the strength attribute in this industry is that they have well-coordinated distribution networks so that they ensure that the products move from the manufacturer to the consumer within the required period. However, the weakness that has been identified in this industry is that in most cases, most supply chains use low technology initiatives. Opportunities that have been identified in this industry is that marketing can increase the number of consumers who purchase these products. In addition to that; the threats that exist are imports and irregular tax structures.
The FMCG industry supply chain has the following characteristics; it deals with high volume of product flows to meet the needs of the customers. Due to the nature of the products that this industry handles, there is close interaction with customers. The products that are used in this industry have less complex manufacturing processes, and to some extent it is dominated by the retailers. The supply chains in this industry have been credited with coming up with new and innovative ideas that have been adopted in the other industries to assist them in their supply process such as point-of-sale solutions and sub-contracted manufacturing.
It is important to point out that the focus of the FMCG supply chains is usually based on reducing costs and the improvement of efficiencies when it comes to buying, distribution and selling. As was stated before, the retailers normally govern the selling logistics in this industry. Bala et. al (2010) identified various issues that are faced by the FMCG supply chain. It was noted that; most of the supply chains normally own various production plants such as being co-manufacturers and co-packers to different products and it increases the complexities that have been witnessed in the supply chain. The distribution component in most of the supply chains is usually handled by other specialized firms and therefore strains the relationship between different stakeholders such as the relationship between warehouse service providers and transport haulers. In addition to that; the retail sector in this industry has created pressure for both the manufacturers and suppliers to produce and distribute the products respectively using the lowest possible cost and also to decrease the response time.
Performance Attributes of the FMCG Supply Chains
Therefore, there is the need to identify the right performance attributes for the FMCG supply chains that could help mitigate the issues that have been identified. The first attribute that will be important in the supply chain that deals with the FMCG products is that; the supply chain has to be reliable. When taking the consideration of an appropriate supply chain it is important to look at the aspect of delivery. The supply chain has to deliver the correct product, at the right place, at the right time, and ensure that it is the right quantity and it is in a perfect condition. All these are meant to ensure that the product will reach the right customer, and if it can fulfill all that then it is considered reliable.
The second attribute is that the supply chain has to be flexible and be responsive in terms of the marketplace changes so as to ensure that it gains a competitive advantage. It has to have an upside flexibility and adaptability, while at the same time ensure that it has a downside adaptability. There is also the aspect of responsiveness whereby; before selecting the supply chain that will be used it is important to check the speed at which the products will reach the customer (Bala, Prakash and Kumar, 2010). The supply chain asset management will monitor the effectiveness of the organization in terms of managing the assets that are needed in order to bring about satisfaction to the customer. Also, a valuable attribute is component management, which ensures that there are various operational management in terms of the supply chain components in relation to the retailers and customers.
Supply Chain Management
Supply Chain Management (SCM) process mainly entails the process of planning, implementing and controlling the undertaking that go on at the supply chain in order to ensure the satisfaction of the customers needs in a quick and efficient manner. The performance measurements that are taken into consideration in the supply chain management involve the attributes that have been mentioned such as reliability, responsiveness, flexibility, cost and asset management. In order to be able to fulfill the aspects of supply management there is the need of various resources such as hardware, software, assets and manpower that need to be effectively utilized (Becks, 2015). They ensure that there is the smooth flow of information, materials and services from the different stakeholders who are involved in the production and distribution of a certain product, until it reaches the endpoint, which is the customer. The supply chain is a sequence from the suppliers, warehouses, operations and retail outlets that ensure that there is a steady flow of products, services and information from the producer all the way to the retailers.
Figure 1: Illustrating a Typical Supply Chain
The concept of supply chain management has received significant focus in the last few years mainly because the supply chain activities have an immense effect on the financial performance of various organizations such as it determines the operating costs, asset management and revenue growth.
Supply chain management takes into consideration all the activities that a business may employ in order to ensure a steady flow of products from the manufacturers to the consumers that need these products. Most top firms in different industries that deal with the FMCG sector normally seek or have established a supply chain management that delivers the products to the customers at an affordable price. The also use the supply chain management principles in order to plan, assemble, store , ship and even track products from the start to finish section of the supply chain.
The supply chain operations are normally classified in the following manners; planning process, which includes forecasting and market research, production and supplier coordination, delivery to the customers and after sale services to the customers (Becks, 2015). Supply chain management has become very important for the FMCG market over the years. It has various benefits but there is the need to know that various conditions have to be met in order to be able to realize these benefits and these include things such as process management and customer satisfaction. However, it is also important to realize that the SCM faces various challenges that as a researcher one has to discuss and find appropriate methods that will be used to solve these problems. The FMCG industry growth rate is high, and its overall demand is expected to rise over the coming years. There are also various structural process changes that are expected in this industry such as the change of the customer preferences and the emergence of new retail formats.
Importance of the Supply Chain Management
In the business world, one of the fundamental lessons that businessmen have learnt is that one of the most effective ways to have a competitive edge over the other businesses is through getting the products that the customers need at a faster pace than their competitors. Therefore, in order to remain competitive, the companies must always be on the look-out for new solutions to the various supply chain management issues such as the modal analysis, load planning, route planning and an appropriate distribution network design. A business should also be ready to deal with the corporate challenges that have impacted the SCM such as globalization and outsourcing.
The reason as to why companies must embark on ensuring that they get the products to the customers quickly than their competitors is because of that fact that is a product is readily available in a certain market, then it will easily be bought by the customers and these will push the sales of the product. It also creates the break in terms of sales. Take for instance, two products (product A and product B) that seem to be equal in terms of fulfilling the need of the customers, and therefore customers are always torn on which product to choose from every time they go to the market to purchase the products. However, product A is always available in the retailers stores that they visit while for product B they have to wait for a couple of days, most of the customers who use these products for various needs will prefer to use product A because it is always available.
Components of the SCM
This is considered to be the strategic part of the SCM. In order for organizations to be effective in terms of their supply chain, they need to have a strategy that they can use to be able to manage all the resources that will help them meet the customer demand in terms of their products and services(Becks, 2015). It is important for them to develop a set of metric that they will use to monitor the supply chain and ensure that it is efficient, low-cost and always delivers high quality to its customers.
An efficient organization is the one that has the ability to choose the right suppliers that they will be sure will be able to deliver the goods and services that they need in their production process. In this case, the supply chain managers will be in a better position to develop a set of pricing, delivery and payment processes with the suppliers and create monitoring metrics. They will also need to manage their goods and services inventory to ensure that they are able to receive and verify shipments at the most appropriate time, transfer the products to the locations where they are needed, and also authorize their supplier payments (Govindan, Soleimani and Kannan, 2015).
It is also known as the manufacturing step and in this case the supply chain managers organize and schedule all the necessary activities that are needed for production. After that there is the need to conduct testing, packaging and ensuring that the products are ready for delivery.
It is the part where organizations coordinate with the other key players in their supply chain and ensure that the customers receive their products. It is only achieved when there is an efficient network from the warehouses that store the products to the transport logistics and then retail stores where customers purchase the products.
Supply chain managers in their SCM need to create methods that they will use in case there are defective or excess products. It ensures that the customers have an efficient channel that they can use to return defective goods, and it ensures that the customers are supported in case defective goods are delivered t...
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