The Solutions to the Hidden Challenges of FMCG Logistics

1. Challenge: Delivery Delays

As discussed earlier, the logistics for FMCG companies are all about speed. Goods need to reach the end-user on time. However, there may be issues that lead to logistics failure, like urban congestion or rural inaccessibility, that lead to problems in the FMCG trade, like

• loss of consumers and revenue
• Decline in reputation
• Damage to goods during transit
• Increased return of goods by end-users due to damage, and others.

Solution: Route Optimisation and Local Fulfillment

A logistics services provider, like Bismarck World, can help in route planning by finding the best routes that can be taken to fulfill the delivery. They can even help in route optimisation based on real-time conditions like traffic, road conditions, and weather. This helps in reducing delays and also cuts fuel costs.

They also help in local fulfillment by placing the inventory in strategically located warehouses that are near the high-demand areas. This drastically shortens delivery distances, enables faster replenishment, and reduces the risk of stockouts or spoilage.

2. Challenge: Inventory Imbalance

The FMCG sector is highly affected by problems like stockouts and overstocking, as both lead to damage to goods, resulting in loss of revenue and increased warehousing costs.

Goods cannot be overstocked because holding them for long can lead to damage to the goods. However, it cannot be understocked either because it is necessary to deliver these goods quickly when an order is placed by the consumer, owing to the shorter allowable holding duration. Thus, the quantity of stock must be accurately piled and stored in warehouses.

This creates a big issue for businesses trading in FMCG products and gives rise to the need for finding better FMCG warehousing solutions.

Solution: Smart Warehousing and Logistics-Driven Inventory Optimisation

The trader and the logistics services provider need to function together and plan strategies that help maintain the inventory at levels that are neither over the needed quantity nor below the demand. One of the efficient FMCG warehousing solutions is to establish warehouses at properly planned locations, taking into account the demand in that region and the time to replenish the stock in that particular warehouse.

Another is to collect real-time data about the stock movement, transit times, and ageing inventory, which can help in making decisions beforehand. The logistics partner can offer Warehouse Management Systems (WMS) and help integrate them with the trader’s ERP systems, thereby providing a clearer picture of the stock management process. These data-driven approaches help enable just-in-time (JIT) deliveries, reduce spoilage and warehousing costs, and improve trade.

3. Challenge: Temperature and Shelf Life Sensitivity

Logistics for FMCG companies is challenging, as FMCG goods are highly sensitive when it comes to temperature management and shelf lifespan. Goods like dairy products, food, beverages, pharmaceuticals, and others need to be stored at specific temperatures, and their period of usability is very short, so they need to be consumed or used quickly after manufacturing.

Storing these things at inappropriate temperatures leads to wastage, and storing them for a long period makes them unusable. Delivering spoiled goods can impact the health of the consumer and the reputation of the business. The business might also have to face legal action if the case becomes severe.

Solution: Integrated Cold Chain and Expiry Management

The solution to this challenge is to partner with a logistics service provider that has the capability and experience in cold chain processes, like transport and storage, which helps stock the temperature-sensitive goods safely. The trader and logistics partner need to enable the FEFO (First Expiry, First Out) inventory process to avoid stockpiling of expired goods. The WMS can help solve this issue by the application of barcode systems.

4. Challenge: Rising Logistics Costs

Fuel costs are soaring, which increases transportation expenses for both short-haul and long-haul deliveries. Simultaneously, warehouse rents are rising sharply, especially in urban areas where demand for space is high but availability is limited. Along with these, the scarcity of skilled labour increases the wage demands. In all, the costs are rising and making trade operations extremely expensive. This burden is either borne by the trader or the consumer, both of which affect the competitiveness of the business.

Solution: Lean Operations and Shared Networks

The rising costs can be combated by turning to lean operations and shared networks as cost-effective solutions. A key strategy to adopting lean operations includes optimising transportation factors like route planning and vehicle utilisation, which significantly reduces the trips, thereby slashing fuel costs. Shared warehouses and FMCG distribution networks divide the costs, like rent, utilities, and staffing, between different traders, thereby lifting the burden off any single trader.

Traders can also partner with a third-party logistics (3PL) services provider, like Bismarck World, that can significantly reduce the overhead cost as compared to self-handled logistics. Through 3PL service providers, traders can further reduce costs by sharing transportation space with other traders and paying for only the space of the truck utilised.

5. Challenge: High Return Rates and Reverse Logistics

Returns and reverse logistics pose a serious burden to businesses in the FMCG sector. Reverse logistics involves several steps, like product retrieval, inspection, restocking, or disposal, all to be performed under a tight timeline. These operations not only add to transportation and handling costs but can also disrupt warehouse flow and inventory accuracy.

Solution: Streamlined Return Management through Logistics Partners

This challenge can be addressed by partnering with a specialised logistics provider who offers efficient reverse logistics solutions. These 3PL service providers use advanced tracking systems and automated workflows to streamline the return process. This enables faster product assessments, better sorting, and improved recovery of goods. This is the reason behind the need to partner with a 3PL provider.