The impact of the Covid-19 pandemic on the fast-moving consumer goods (FMCG) industry is expected to run into billions considering the massive change in demand for some products and the complete decline for others.
According to Sanjay Nair, a senior technology expert at tech company Icron, the cost of not being prepared has been high.“Until Covid-19 supply chain designs were based on the assumption that materials f low freely globally enabling manufacturers to source, produce and distribute to global markets from the lowest cost locations around the world,” he said.
“This pandemic has challenged the validity of this fundamental assumption and illustrated the vulnerability of having too many of one’s sources and supplies in one area. It has highlighted the impact of over-dependence on suppliers far from one’s market.”
Fundamentally, FMCG manufacturers had two simple, but conf licting, business goals: to maximise customer satisfaction while minimising inventory and costs, explained Nair. Balancing these business goals in the most profitable way possible will now be the core challenge that producers face.“It has become clear that some companies have gone too far in the relentless pursuit of cost efficiencies. This has resulted in supply chains that are overly fragile and unable to withstand sudden and unexpected disruptions.
“Not only do companies have to scale back on that cost efficiency, but they are going to have to accept that they need some kind of level of inbuilt resilience to the external shocks we are seeing today.”
He said the current crisis had elevated the importance of constantly questioning and evaluating the structure and design of the supply chain, while analysing the trade-offs between cost, service and risk.This was not easy in the FMCG sector where demand for products was high.According to Melise Teksan, a supply chain director at Icron, while FMCG demand is currently higher than it has ever been, with tremendous peaks in very short periods of time, it is not for all products.
“Supply chains have been struggling under this pressure. In some cases some manufacturers simply did not know how to deal with the shock.”She said the past few months had proven that statistical data forecasting was not enough to guide companies.
“What we have experienced looks and feels like nothing we have ever done or felt before. Statistical predictions and forecasts have not been enough to protect companies against this pandemic.”According to Teksan scenario planning is likely to be used far more in the future.
“We need to be able to proactively plan for different scenarios, evaluating the various options from the least likely to occur to the most.”Teksan said it was in the ability to sense dramatic changes both in demand conditions and in supply volatility ahead of a crisis where the solution lay