FMCG supply chains are regularly under stress. Everyone here will remember the impact of the shortage of toilet paper or pasta in Europe at the start of confinement, and the recent crises will have revealed the flaws in the logistics systems in place.
By analyzing the current state of the retail market, two distinct trends can be observed. On the one hand, the market is softening; on the other hand, from a logistical point of view, the lack of capacity is reducing after restrictions in 2021 and the beginning of 2022. In the future, the global FMCG market will probably remain on an upward slope: by 2026, it is expected to grow by 284.4 billion euros, driven by the increase in online sales.
However, the current economic situation is leading to a clear rise in prices and a drop in demand for production. The consumer goods sector, too, had to face additional costs amounting to billions of euros due to the increase in the prices of raw materials and transport, which are generally higher in this sector due to the specific requirements in temperature and humidity.
How can the sector adapt to these changes in the long term, and what role do digitization and data play?
Digitization, a source of balance
Actors in the consumer goods supply chain today must extract the most value possible from their operations, while optimizing their resilience in the face of disruptions which, according to McKinsey, are becoming more frequent. They play acrobats to keep costs low, while meeting the needs of increasingly demanding consumers and juggling shortages. A product not available is not only a lost sale: it is also a reason for the consumer to turn to another brand.
Achieving this balance between profitability and resilience must resolutely go through digitalization. The sector is still lagging behind in this aspect, despite efforts to make greater use of electronic documents and better integrate digital processes. The digitization of non-digital procedures and automation, especially in the management of time slots and goods depots, are key issues – and necessities considering the daily dependence of millions of people around the world on products. in question, as well as the storage and consumption times of the latter.
Adopting a “digital first” approach is therefore essential to achieve the profitability and speed sought, and to better cope with disruptions. Lack of resilience cannot be an option for retail. Companies must therefore look beyond basic automation, relying more on data sharing and communication between supply chain actors to have better visibility on points of sale, stocks, and all of the transport and distribution chains.
Data at the center of tomorrow’s supply chains
Adapting to unforeseen events, whether economic, geopolitical or meteorological, is today largely dependent on the ability of companies to exploit real-time market data to optimize operations.
Let’s take the example of toilet paper again. The latter is transported almost daily to several countries and hundreds, even thousands of sites. Carriers sometimes have to cross international borders, adapt their route according to traffic jams or road closures, and synchronize with countless other carriers and shippers. The scale of logistics involved is immense, but data can serve as a common thread through these types of complex transport operations.
To this end, players in the consumer goods supply chain must also prioritize communication and collaboration with their peers to facilitate the exchange and use of this data. For example, it is not necessary for a truck to travel hundreds of kilometers empty in order to pick up a load while another truck may be unloading nearby. Better collaboration makes it possible to ensure a certain durability in the event of unforeseen events thanks to broader access to market data in real time, whether it concerns transport times, costs, or time slots.
For international players, however, managing the volumes of data at their disposal is not easy. New technologies play a key role here: the use of artificial intelligence, automation and intelligent transport management platforms in the cloud should serve as the basis for data-driven decision-making.
The main objective of players in the FMCG industry is to ensure that products reach customers on time in a systematic manner. The key is to maintain the flow of goods, no matter what difficulties arise. Adopting a digital-first approach, based on data mining and collaboration, will allow the sector to improve its responsiveness and sense of adaptation.