In the last two years, unforeseen events like the global lockdown, rising fuel costs and the strong urge to move towards environment-friendly measures have forced FMCG organisations worldwide to push their boundaries of innovation, and bring more efficiency and sustainability into their business practices.
Particularly in Europe, FMCG organisations have faced supply chain disruptions because of four key reasons;
- The pandemic, which disrupted the global supply chains and caused unexpected demand fluctuations, lockdowns, border closures, and other Government measures which deeply impacted the transportation of goods and raw materials, leading to inventory shortages and stockouts.
- The UK’s exit from the European Union (EU) which led to the introduction of new customs procedures, tariffs, and trade barriers, and increased costs and delays in the movement of goods across borders
- The various challenges in the logistics and transportation sector, like driver shortages, increased demand for e-commerce, and rising fuel costs, which led to delays, capacity constraints, and higher transportation costs
- The increasing pressure to improve sustainability and reduce environmental footprint, which created challenges in sourcing sustainable raw materials, reducing packaging waste, and implementing more eco-friendly transportation and logistics practices.
In an earlier blog on the FMCG trends to watch out for in 2023, we talked about the significant shift in consumer preferences towards healthy, environment-friendly and sustainable products, and the need for FMCG companies to address these on priority this year. You can read more about this here.
How can global FMCGs overcome these supply chain challenges?
A Merit expert says, “We would say, change is already underway. While on the frontend, global FMCGs have adapted data analytics to bring more process efficiencies in shop floors, in the backend, their focus has been on digitising their supply chain management and procurement processes.”
According to various studies by McKinsey, the FMCG industry has seen a significant increase in digitisation in supply chains. Around 75% of FMCG companies have implemented some form of digital transformation in their supply chain operations, with a focus on improving visibility, agility, and efficiency. Moreover, sustainability is becoming a top priority for FMCG companies, with a significant focus on reducing waste and improving resource efficiency.
Another McKinsey report estimates that 40% of FMCG companies are implementing sustainability initiatives in their supply chains.
How Mondelez India Lead the Way into Supply Chain Digitisation
A well known example of a global FMCG brand which has digitised its supply chain operations well ahead of most of its competitors in the CPG/ FMCG space, is Mondelez India. The organisation showcased its digital prowess and strategy on three key fronts;
- During the Covid lockdown, when there were severe movement restrictions, the organisation launched the Integrated Digital Factory, through which people could troubleshoot, monitor and mentor people on the factory floor remotely, using digital technologies.
- During the same period, it set up a mega production line, which required installing local and imported equipment and having several employees on the shop floor. It achieved this by using AR/VR technology to involve vendors and experts from across the globe, to commission the line, train, mentor and troubleshoot, all remotely.
- Forecasting demand and managing wastage was one of the biggest challenges that FMCG organisations faced during the pandemic. While most of them continued to follow the same production protocol, Mondelez used AI and ML to identify the shift in consumer consumption patterns and changed its production strategy accordingly.
What steps do you need to take to digitise your supply chain operations? Find out more here.
5 Benefits of Supply Chain Transformation
There are several advantages of digitising supply chain operations in the FMCG industry. Here are the top 5.
Digitising supply chain operations can improve visibility into the entire supply chain, from raw materials to finished goods. This enhanced visibility can enable organisations to track inventory levels, monitor product movement, and identify potential disruptions, which can help them make more informed decisions and improve supply chain efficiency.
Optimise time, resources and cost
Digital technologies such as AI, machine learning, automation, and robotics can help FMCGs optimise their supply chain operations, reduce lead times, and lower costs. For example, automation can streamline processes such as order processing and inventory management, while machine learning can help companies forecast demand more accurately and optimise production planning.
Provide better customer experience
Digitising supply chain operations can help FMCGs provide a better customer experience by improving product availability, reducing lead times, and enabling faster delivery. This can lead to increased customer satisfaction and loyalty.
Better collaborations and partnerships
Digital technologies can facilitate better collaboration between FMCGs and their suppliers and partners, improving communication and information sharing. This can help companies respond more quickly to changes in demand and supply and improve overall supply chain performance.
Digitising supply chain operations can help FMCGs improve their sustainability by reducing waste, improving energy efficiency, and optimising transportation and logistics. This can lead to a reduced environmental footprint and improved social responsibility.
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