SUPPLY CHAIN MANAGEMENT

FMCG INDUSTRY SUPPLY CHAIN ANALYSIS

Faculty – Prof. P. Chandiran

Submitted By,
Group E
Arwin Michael J – F20128
Ragunanthan S – F20155
Rinto K Thomas – F20159
Varma Mangala Prasad Mevalal – F20179
Industry Supply chain Analysis

TABLE OF CONTENTS

INTRODUCTION......................................................................................................................2

SUPPLY CHAIN STARTEGIES IN FMCG INDUSTRY.......................................................3

MAIN STRATEGY IN INDIAN FMCG SECTOR..................................................................6

SUPPLY CHAIN NETWORK OF FMCG SECTOR...............................................................7

SUPPLY CHAIN LENGTH......................................................................................................8

SALES AND OPERATIONS PLANNING............................................................................10

BEST PRACTICES IN SUPPLY CHAIN USED IN FMCG..................................................12

IT SOLUTIONS FOR SUPPLY CHAIN................................................................................14

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INTRODUCTION

The Report is on the supply chain information of the FMCG industry. The major focus of the
research is on strategies followed by the industry to have an efficient supply chain. The
supply chain network followed by the FMCG companies. Average length of the supply chain,
Inventory performance of the sector. Sales forecast of the FMCG sector and Sustainable
practices the FMCG companies follow and the Information technological roles in the supply
chain. For the average depiction of the supply chain length, we use ITC as it is the major
player in the FMCG sector. The sales and operational planning of FMCG consist of 6 steps
which includes product review, Demand review, Supply review, Pre-S&OP and Executive
S&OP.

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SUPPLY CHAIN STARTEGIES IN FMCG INDUSTRY

The major change in the supply chain occurs when comes to the digitalization, Supply chain
4.0. Digitalisation made the industry to faster, flexible, granular, accurate and efficient in
supply chain management. In effect of improving the supply chain the Industry focused on
more aspects like automated production at factories, autonomous transportation to warehouses,
automated warehouse, predictive shipping, shipment rerouting by the customers and last-mile
delivery using automated vehicles or drones. Even though making different innovations and
changes their occurs different challenges in supply chain, to overcome that the FMCG
Industries used some strategies.

1. Focus on Infrastructure & Workforce Readiness First in Technology-Based Supply

Chain Improvements

Many companies fail completely or fail to deliver the required performance is due to less
focus on the infrastructure and workforce readiness in the technology based supply chain.
The best practice in undertaking supply chain improvement initiative is to understand the
difference between the current and required “infrastructure capabilities and workforce
readiness”. This difference should be assessed both at the company’s end and the partners that
will be the part of the planned supply chain initiative. Once the difference between current and
required infrastructure capabilities and workforce readiness is determined, the companies must
access the number of resources required to eliminate this difference and include this in the
initial implementation plan at priority. There are times that supply chain partners show
reluctance to improve the infrastructure due to cost and other constraints. At that time, the
FMCG companies must lead them by providing them with all necessary support to ensure that
partners also improve their infrastructure and workforce readiness to match the level required
for the planned supply chain improvement initiative. This may involve providing the financial
support, assurance of long-term business, free training of supplier workforce, etc.

Adoption of this best practice will ensure improvement in the success rate of supply chain
improvement initiatives and an enhanced level of performance after implementation.
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2. Collaborative Planning, Forecasting and Replenishment

Majority of the small companies rely on spreadsheets and emails to monitor important data
such as point of sales, stock in hand etc. This has repercussions such as an increase in response
time, costs, inventory and higher forecasting errors. This can cause the retailers to face stock-
outs, material-shortage, lost sales and a decrease in customer service level while manufactures
can face obsolescence and higher inventory cost that impacts the overall margin.

To handle these issues in supply chain and improve performance, leaders in FMCG
Companies are using collaborative planning, forecasting, and replenishment
(CPFR) supplemented by real-time access of data e.g. point of sales, stock on hand, etc

Which Includes

 Complete Supply Chain

Using network-based models that allow all entities in the supply chain to act as one
virtual organization and work as collaborators that share data across the network to
manage and fulfil the customer demand.

 Down Stream
Integrating 3PL partners and retailers in CPFR to improve the forecasting accuracy,
improve availability and reduce cost.

 Up Stream
Sharing data by item, store and day to all suppliers help supplier with lower
capabilities to plan their production and distribution.

One of the important considerations in this level of collaborative, planning, forecasting and
replenishment is the maturity level. The processes should be mature enough to share data
automatically with accuracy and precision. A lack of maturity can create hindrance in
developing smart, predictive forecasts and processes. Implementation of this best practice can

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lower the level of inventory in the supply chain, improve transport and warehouse utilization,
and increase the customer experience and availability.

3. Data Security - Crisis of connectivity

This involves improving supply chain performance through implementation of technology i.e.
companies are increasingly using a large number of data collectors such as access points,
sensors, and scanners. This change in the fundamental structure of FMCG supply chains is
creating multiple opportunities for a data security breach. A survey of C-level executives
indicated that cybersecurity risk, such as data breach and IT incidents, is the top supply chain
risk. For example, RFID tags can be a source of viruses and pose cybersecurity threats.

The most critical aspect in this is that the society, legal system, and other stakeholders put the
responsibility of managing cyber risks and preventing cyber-attack in supply chains on the
leaders in the supply chain that is FMCG organizations. Not managing this risk leads to costly
fines and major reputational damages.

Practises to reduce the risk in supply chain are

 Risk Identification and assessment

Proactively identify risk, involve directors and boards and set an acceptable level of
risk.

 Supplier capability assessment

Research partners & suppliers, their reputation and linked organizations and IT
capabilities including security, invoicing, contact methods, system login methods,
and automated systems. Ensure that their level matches with the levels necessary for
the protection of data

 Mandatory Expectations
Input mandatory expectations in contracts i.e. required security levels, assurance
checks and setting ownership of the data. Also, set responsibilities in the event of the
occurrence of the risk.

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MAIN STRATEGY IN INDIAN FMCG SECTOR

Collaboration of Business Objective and supply chain Objective

Expanding Depth and Width of Distribution, Offering Broad Product line and Expanding
Revenue are the prime focus of FMCG Industries in contrast to Enhancing customer service /
satisfaction, profit and other objectives. At the same time, reducing lead-time, reducing
transpiration cost and reducing inventory cost follow closely in terms of supply chain
priorities. Undoubtedly, all these objectives stated above are the most vital and basic criterion
for any supply chain management strategy to produce tangible results, which is well
understood by the top management.

Further the weighted scores of various supply chain objectives were analysed and grouped by
their level of importance. The scores on supply chain objectives were then compared to
scores on business objectives. The business objectives and the supply chain objectives could
be broadly classified under three focal areas as listed in the Table.

Focal Area Business Objectives Supply Chain Objectives

High: Maximise Customer Satisfaction Enhance Customer Service/ Satisfaction

Customer service Improving On-time Delivery

Medium: Maximise Profit Expanding Revenues

Profit Deliver value to shareholders
Maximisation Increase turnover (sales)
Increase Return on Investment
Reducing Inventory Costs
Lowest Product Cost
Reducing order to delivery cycle time
Reducing Lead Time
Reducing Transportation Costs
Reducing Warehouse Costs

Low: Increase Earning Per Share Flexibility of Production Volume

Operational Flexibility of Product Mix
Excellence Reducing/Rationalising Supplier Base
Expanding Width/Depth of Distribution

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Offer Broad Product Line

Having Products in Stock

SUPPLY CHAIN NETWORK OF FMCG SECTOR

The supply chain network of any of the FMCG companies in general is starting from the
company hub factory carried over to the C and F agency and then deliver to the Wholesale
dealers. From there it goes to the either the retailer directly or through small wholesale
dealers to retailers and the to the final customers.

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SUPPLY CHAIN LENGTH

The main concern of the business world right now is the unpredictability of distribution and
supply chain issues. A company's supply chain design's structure and alignment are vital to its
success. The supply chain is in charge of getting products to the right place, at the right time,
and for the appropriate price. Before creating a supply chain, a company must first
understand its length. The length of a company's supply chain is an important issue to
consider as it determines the market reach of the product and its utilisation. The average
supply chain length of various ITC vs HUL products from two retails are tabulated below,

Product Brand Field A B C = A+B Average

ITC
Retail I 90 30 120
Noodle Yippee 140
Retail II 90 70 160
Retail I 60 15 75
Soap Vivel 80
Retail II 60 25 85
Retail I 30 6 36
Biscuit Marie Light 36
Retail II 30 6 36
HUL
Retail I 60 35 95
Noodle Knorr 95
Retail II 60 35 95
Retail I 30 6 36
Soap Dove 38
Retail II 30 10 40
Toothpast Retail I 60 10 70
Close Up 93
e Retail II 30 15 45

On comparing, HUL has lesser supply

chain length than ITC. In order to reduce
its supply chain length, ITC can diverse
its products further more in the market.

Note:

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A ⟶ Time gap between prod. and study date

B ⟶ Avg. time the stock spends in the store
C ⟶ Total supply chain length
Inventory Performance of ITC
ITC's total inventories for the quarter that ended in June 2021 was $0.00 Mil. ITC's average
total inventories from the quarter that ended in March 2021 to the quarter that ended in June
2021 was $721.46 Mil.
i. Inventory can be measured by days sales of inventory (DSI). ITC's days sales of
inventory (DSI) for the three months ended in Jun. 2021 was 36.74.
DSI = (Total Inventories / Revenue) * (Days in Period)
= (721.45 / 1791.72) * (365 / 4)
= 36.74
ii. Days Inventory indicates the number of days of goods in sales that a company has in the
inventory. ITC's Days Inventory for the three months ended in Jun. 2021 was 83.42.
Days Inventory = (Total Inventories / Cost of Goods Sold) * (Days in Period)
= (721.45 / 789.21) * (365 / 4)
= 83.42
iii. Inventory Turnover measures how fast the company turns over its inventory within a
year. ITC's Inventory Turnover for the quarter that ended in Jun. 2021 was 1.09.
Inventory Turnover = (Cost of Goods Sold) / (Total Inventories)
= (789.21) / (721.45)
= 1.09
iv. Inventory-to-Revenue determines the ability of a company to manage their inventory
levels. It measures the percentage of Inventories the company currently has on hand to
support the current amount of Revenue. ITC's Inventory-to-Revenue for the quarter that
ended in Jun. 2021 was 0.40.
Inventory-to-Revenue = (Total Inventories) / (Revenue)
= 721.45 / 1791.72 = 0.40

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SALES AND OPERATIONS PLANNING

Sales & Operations Planning (S&OP) is crucial to optimize overall business margins and
customer service levels. Sales & Operations Planning requires alignment between supply
planning, production planning, inventory planning and demand planning. Establishing
alignment between the different planning teams is key to the creation of an integrated
business plan, which supports in achieving the business goals. Moreover, the right integrated
business plan approach encompasses what-if analyses which support our clients in making
the right decisions.
The 6 Steps of the S&OP Processes

Product Review:  In this first phase of the S&OP process, planners involved in R&D,
product development, and new product introduction analyse the health of products in the
market, examine product pipelines, and arrive at decisions about product planning. These
decisions might include setting dates for new production or sunsetting to determine project
prioritization and resource allocation. Other topics discussed in this phase may include the
impact on existing products when a new product is introduced, also known as
cannibalization, or supersession.

Demand Review:  The goal of this phase is an unconstrained forecast or consensus demand

planning, incorporating a holistic picture of independent and dependent demand. Factors
influencing independent and dependent demand may include marketing, new product
introduction, consumer trends, product hierarchy, and interplant part demand. The consensus
demand plan is based on a combination of sales, marketing, and product plans. The demand
plan is measured either in units or revenue. Statistical forecasting is combined with input
from customers and marketing plans to estimate, refine, and arrive at a consensus plan.
Historic performance will be factored into the plan, and eventually the demand plan will be
compared to the results of the finance review to find any revenue or demand gaps.

Supply Review:  The goal of this phase is a supply plan that syncs with the consensus
demand plan. Ideally, these two plans work in unison. The supply plan should balance
customer service and minimize inventory as well as operating costs. A baseline production
plan and rough-cut capacity plan are developed, along with alternate supply plans that factor

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in capacity and demand variations. “What-if” scenarios play a key role in this phase of the
process, so it’s essential to have a technology platform with the capability to run them using
real-time data. These scenarios vary from more tactical “what-if” questions to longer-term
scenarios, but the function of both is the same: to reduce risk and understand the up and
downsides of a wide range of adjustments. Examples of more straightforward scenarios
include inventory or workforce re-balancing, and more complex scenarios such as on-
boarding a new supplier, new capacity, or workforce training. Ideally, as these scenarios
develop, they’re automatically connected to budgetary needs so financial risk projections can
be made.

Pre-S&OP:  Pre-S&OP is a series of meetings conducted with leaders at various levels that

showcase the connectivity of plans across product, demand, supply. Ideally, these meetings
centre around a cloud-based platform that houses all the plans in a single place. The purpose
of pre-S&OP is to identify key gaps and disconnects and create strategies to handle those
issues. The plans are reviewed in shared dashboards and actual vs. variance is analysed,
keeping targets and budgets in mind. Metrics like revenue, profit, and inventory are analysed
by both rolling up to the corporate level and down to the product-line level to gain an
understanding of the financial and operational implications of decisions. Adjustments to the
product, demand, and supply plans are made in real-time.

Executive S&OP:  The finish line is in sight. The final phase of S&OP brings all plans and
data together in a unified, cloud-based platform to be used in executive S&OP meetings.
“What-if” scenarios and the associated risks are reviewed, and decision points are noted so
leadership knows when they’ll need to make the appropriate choices. Any key decisions that
weren’t resolved in the first five phases are addressed in this phase, the reasons for escalation
are examined, and decision deadlines are set.

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BEST PRACTICES IN SUPPLY CHAIN USED IN FMCG

Wise determining and vital arranging in the CPG/FMCG climate is both basic and
complex. Buyer inclinations and advances are continually changing, and clients request
imaginative items, which could mean delivering a more extensive scope of products at higher
volumes rapidly. In developing business sectors, buyers are additionally spending enough to
raise the required and extended production network. The online business market is becoming
significantly more rapidly than physical stores are, and items are getting better and more
manageable, opening new roads for FMCG players.
With an energizing yet erratic FMCG scene that incorporates more continuous
renewal cycles, advancements, item developments, and lately COVID-19, your image is
helpless to less steady request arranging cycles and conjectures.
Some organizations depend on manual accounting pages and messages to screen their
production network, including significant numbers like retail location (POS), stock close by
in different distribution centres, and so on Repercussions, for example, a slack accordingly
time, expenses, or request arranging and determining blunders can prompt stock-outs and
deficiencies, lost deals, and a diminishing in client support level. In the meantime, producers
can confront outdated nature and higher stock costs that sway the general edge. Collective
arranging, gauging, and renewal (CPFR) is a training that must be enhanced by constant
admittance to retail location and stock information. Your FMCG organization needs to utilize
measures adequately intensive to share information naturally with exactness and accuracy.
These can be difficult to nail down. Along these lines, from AI models and stages that permit
all elements in the store network to share information across channels distribution centres,
3PL accomplices, providers, and so on to recognizing risks.
1. Get the Right data:
Extraordinary forecasts depend on incredible information. The best models
should process and examine a wide assortment of informational collections. Yet,
despite the fact that amount matters, it's the "tidiness" of the information that is
basic too. The information you're taking care of to an estimating model ought to
incorporate chronicled deals (shipments at the SKU-level by client, transport to
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and transport from areas), own and cutthroat showcasing and exchange ventures
(like advancements), online inquiry conduct, web-based media makes reference
to, retail location utilization information, irregularity, climate examples, and
fixing and wellbeing patterns, among other datasets that can help FMCG
organizations get interest.

2. Automation:
Basically, automation permits you to get away from manual cycles. With AI-
controlled interest arranging programming, FMCG brands can anticipate deals
across all channels and drill into forecasts by client, transport to, brand, section,
item, see precision, and mistake reports at the SKU level. Non-robotized request
estimating techniques, particularly physically monitoring information on book
keeping pages like many brands do, can't take unique, equal informational indexes
into account or give a solitary view; they're un-dynamic. Man-made intelligence
driven stages, based on AI models sensitive to the intricate details of the CPG
business, then again, are fit for learning on the spot.

3. Centralize:
Running a brand can get feverish, no doubt. You could be composing messages to
your distribution centre and co-packer, going to and fro between frameworks to
handle orders with KeHe and Walmart, and exchanging between your
bookkeeping pages for online business, orders, buying, and stock

4. Proactively identify risk:

Meet with your chiefs and sheets and different partners to set up OK degrees of
hazard. Retailers should meet routinely with their inventory network group to
survey techniques and strategies, guaranteeing that they're consistent, proficient,
and modern. This keeps away from bottlenecks and tasks reinforcements, and
smoothest out activities all things considered. It additionally implies you'll get
extortion early.

5. Choose suppliers wisely:

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At the point when you're picking providers and accomplices, research them and
counsel your organizations to decide their standing. Gather data on their capacities
like security, invoicing, contact strategies, framework login techniques, and
computerized frameworks. It's important that you trust your provider to keep your
information hidden.

6. Supplier relationship:
To prevail in retail, you must have fruitful associations with your providers.
Consider them a union, as the two players are cooperating to improve the
purchaser/provider relationship. The best connections have open two-way
correspondence, with shared targets to proceed with progress and worth, measure
execution, and proactively plan for compromise.

7. Budget plan:
Set your advertising spending plan, your business financial plan, your General
Administrative Costs (like wages and advantages, lawful advice, and office
supplies), and to sort out individuals you can stand to recruit. You'll need to
comprehend your net and net edges, just as your benefit. Sort out individuals you
can stand to recruit; and keep your gross income surpassing your uses. For income
purposes, you should know when your organization should plan venture adjusts,
as well. You ought to likewise gauge how much income it will take to get to
productivity. To do all of this planning, it's important to monitor each cost in one
stage.

IT SOLUTIONS FOR SUPPLY CHAIN

By bridling a blend of advances like AI and prescient investigation, organizations can

robotize distribution centre activities, further develop conveyance times, proactively oversee
stock, improve vital sourcing connections, and make new client encounters that expansion
fulfillment and lift deals. Operations covered by existing applications include inventory
management, order fulfilment, warehouse management, sales returns, in that order. Existing

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IT solutions encompass the business operations covering Inventory Management, Order

fulfilment, Warehouse Management and Sales Returns. All of these areas are primarily
restricted to the boundaries of the enterprise. Some of the examples are:

1. Computerized Shipping and Tracking:

With the guide of present day advancements and online programming, similar to a
transportation the executive’s framework (TMS), you can improve on the stockpile cycle and
drastically diminish delivering mistakes. Using frameworks like TMS, ERP, and even CRM
empowers insightful entrepreneurs to unite all parts of their production network in one spot.
The product will permit you to carefully coordinate stock information, screen and oversee
delivery, and following data, and make electronic bills of replenishing or solicitations easily.
Using production network the executives innovations, you can enormously decrease the time
spent transportation, getting, following, and incorporating request information, which will
save your organization both time and cash.
Not exclusively will the utilization of generally accessible inventory network innovation
applications work on the functional productivity of your inventory network, it will likewise
incredibly improve the client experience by giving shoppers the capacity to ceaselessly
follow the situation with their orders. Through digitalized following, you can altogether
diminish transporting mistakes and all the more quickly react to the blunders that do happen.
Nowadays, having innovation is fundamental for running a flourishing organization that is
both business and customer well disposed.

2. Radio frequency identification:

Radio Frequency Identification (RFID) is a fundamental piece of innovation that can give
incalculable advantages to the entrepreneur. RFID chips are set on each item and give an
approach to entrepreneurs to effortlessly follow their stock. Because of the expanded
perceivability RFID chips give, they will considerably further develop your inventory
network proficiency by identifying any request irregularities as they happen, empowering
workers to quickly address botches. Furthermore, it considers simpler and more reliable
following, empowering entrepreneurs to have most extreme control and perceivability over

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their items consistently. Since RFID chips give modernized item the board, they can kill the
potential for blunders, improve on the inventory network, and diminish working expenses.
Radio recurrence recognizable proof (RFID) has become one of the megatrends in
coordination’s. It is astounding then that regardless of the countless RFID labels sold for this
present year alone that, as indicated by results from the 2014 GS1 US Standards Usage
Survey, at last saw the innovation satisfying the expectations in the coordination’s business
over the most recent couple of years.

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