Fmcg Case Study
Inventory Productivity in FMCG Supply Chain
Over the recent years, FMCG industry has realized the significance of adaptation to various shoppers’ needs. Apart from quality, consumers demand variety, availability and freshness of products . Meanwhile, they are highly price sensitive due, inter alia, to constraints on purchasing power, availability of substitute products on the market, promotional offers and competitive pricing strategies of rival companies .
Similar to other industries, supply chain of FMCG companies encompass several business divisions with possibly conflicting objectives. On the other hand, the intensely competitive and continuously evolving business environment coupled …show more content…
Although given the short lead time in FMCG supply chain, it is necessary to maintain a level of safety stock, too much inventory holding calls for storage space and imposes additional costs (construction, rent, and maintenance of a warehouse, workforce, insurance, etc.). Furthermore, companies are faced with time-specific issues (namely product degradation, deterioration or obsoleteness) as well as customer-specific ones (e.g. shift in consumer demand) . Most importantly, by converting cash to tangible assets too soon, they might fail to produce higher (or even) equal value. Nevertheless, in today’s competitive and volatile marketplace, it is undesirable to run out on products and lose sales . Therefore, deciding on the right level of safety stock is a point of concern for the FMCG …show more content…
The objective of the research is to model and manage demand uncertainty to achieve the Critical Success Factors of supply chain for FMCG companies (i.e. availability upon demand, freshness at delivery, and cost efficiency) through enhanced inventory productivity.
The scope of this research will include determinants of consumer demand for FMCG and how market uncertainties can be administered to provide reliable forecasts of demand and thus, achieve inventory productivity. The research will not be focusing on determinants of demand in other industries.
In order to address the research problem and in line with the objectives of the research, a sequence of questions need to be answered. The main research questions are:
1. What are the underlying elements of market demand?
a. What are the general elements of market demand in FMCG (i.e. common elements for different