Fmcg Supply Chain- Managing Complexity

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“Managing Complexity”: Managing complexity can be explained clearly with the help of following trends- 1) Increasing Number of Products and Services: With the increasing consumerism and competition among the organizations to attract more and more customers, customer has become more demanding and uncompromising. Companies are customizing products more and more to retain old customers and attract new customers, to fulfill increasing customer demand and gain competitive advantage over rival firms. This has led to the introduction of large number of new products with multiple SKUs which have very short life cycle. All these factors have led to increased complexity in supply chain which needs to be managed carefully.

2) Increasing Number of Suppliers: With the advent of large number of new products and SKUs, company’s demand for new raw materials is increasing continuously. This increasing demand for different raw materials has led to the large number of suppliers supplying to one company. Managing increasing numbers of suppliers in a supply chain is a complex task.

3) Global Sourcing: With the increasing globalization and pressure to reduce cost, companies are looking for cheaper sources of materials globally. They are sourcing materials from all over the world. This increase in the number of distant suppliers adds to the complexity of supply chain.

4) Increasing Number of Manufacturing Locations: With the dipping margins and increasing competition, companies are spreading their manufacturing facilities to the places where it is cheaper to produce goods. Goods are produced at these locations and then transported to either central distribution centre or directly to the regional markets depending on the cost of distribution. This has made material requirement planning and manufacturing a very complex activity.

5) Increasing Number of Distribution Centers: With the companies targeting global markets to sell their products, need to store these products at distribution centers close to the market has increased. Increased transportation cost has also contributed to the increased number of distribution centers. Storing products at multiple locations reduces the visibility in the supply chain and makes inventory management a complex activity.

6) Increasing Number of Distribution Channels: For the wider reach of their varied products, companies are adopting different distribution networks suited to the products. Company may choose to sell the products directly via mail order, internet or phone; through any third party agent or through a network of distributors, wholesalers and retailers or any combination of these. This has made channel management a complex activity.

7) Reducing Lead Time Increasing Number of Shipments: With the compressing time line to fill customers order, lead time is getting shorter and shorter day by day. This has made consolidation of goods a difficult task and led to a significant increase in the number of smaller shipments. All this has made transportation planning very complex. All these smaller trends taken together lead to the mega trend “Managing Complexity”. Why “Managing Complexity” is a Mega Trend in Supply Chain Management: In a flatter world where supply chains are getting longer and complex day by day, managing complexity is the key to competitive advantage. All these seven trends mentioned above play an important role in growing complexity of supply chain. Complexity makes a supply chain less responsive and inefficient and it also drives cost up and profit down. So, managing complexity is a key to success of supply chain in the current world. All these factors make “Managing Complexity” a mega trend.

Why “Managing Complexity” is Important?

1) Lower Margins- FMCG are products with relatively lower margins and long supply chains. Freight absorption capacity of these products is very low as compared to other products. Any...
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