Supply Chain Planning in FMCG: Optimising Service & Efficiency for Competitive Advantage
Fast-moving consumer goods (FMCG) companies operate in a highly competitive market with demanding customers, fluctuating demand, and supply chain complexities. Therefore, supply chain planning plays a crucial role in the success of FMCG companies. In this article, we will explore the various strategies and technologies that FMCG companies can use to optimise their supply chain planning process and gain a competitive advantage.
Demand Planning and Forecasting
The first step in supply chain planning is demand planning and forecasting. This involves understanding the customer demand and predicting future demand patterns. Advanced Planning Systems (APS) and Enterprise Resource Planning (ERP) systems are useful tools in this regard. They use data analysis, machine learning algorithms, and statistical models to provide accurate demand forecasts, which can help companies to plan their production, inventory, and logistics operations.
Scenario planning is a useful technique for predicting and mitigating risks in the supply chain. FMCG companies can use scenario planning to simulate various demand scenarios, such as changes in customer behavior, market trends, and economic conditions. This helps to identify potential supply chain disruptions and develop contingency plans to mitigate risks.
Inventory optimisation is another critical aspect of supply chain planning. FMCG companies need to maintain optimal inventory levels to balance demand and supply. Excess inventory can lead to high carrying costs, while low inventory levels can lead to stockouts, lost sales, and dissatisfied customers. Materials Requirements Planning (MRP) and service optimization are essential tools for inventory optimisation. MRP calculates the materials needed for production based on demand forecasts, while service optimisation ensures that the right products are available at the right time and place.
Sales and Operations Planning (S&OP)
Sales and Operations Planning (S&OP) is a cross-functional process that involves aligning the company's sales and operations plans with its financial goals. This process helps FMCG companies to make informed decisions regarding production, inventory, and logistics, based on the most up-to-date demand and supply data. S&OP involves collaboration between various departments, such as sales, marketing, finance, and operations, and can be a useful tool for optimising the entire supply chain.
Integrated Business Planning (IBP)
Integrated Business Planning (IBP) is a more comprehensive approach to supply chain planning, which involves aligning the entire business strategy with the supply chain strategy. IBP involves not only the sales and operations planning process but also other functions such as marketing, product development, and finance. By aligning the entire business strategy, IBP can help FMCG companies to optimise their supply chain, reduce costs, and improve customer satisfaction.
Cost optimisation is a critical aspect of supply chain planning. FMCG companies need to optimise their supply chain costs, including receiving costs, carrying costs, and working capital. Slow-moving and obsolete (SLOB) inventory can lead to high carrying costs and impact working capital. Therefore, FMCG companies need to optimize their inventory levels and reduce SLOB inventory. They can also reduce costs by optimizing their logistics operations, such as transportation, warehousing, and distribution. Optimising costs can help FMCG companies to improve their COGS efficiency, increase profitability, and gain a competitive advantage.
Supply chain planning is a critical process for FMCG companies.
By optimising their supply chain planning process, FMCG companies can improve their demand forecasting, inventory management, logistics operations, and cost efficiency. Advanced Planning Systems (APS), Enterprise Resource Planning (ERP) systems, scenario planning, inventory optimisation, sales and operations planning (S&OP), Integrated Business Planning (IBP), and cost optimisation are essential tools for optimising the supply chain. By implementing these strategies, FMCG companies can gain a competitive advantage, improve customer satisfaction, and increase profitability.