Packaging, regionalization of distribution centers, and horizontal collaboration are among the strategies that manufacturers of fast-moving consumer goods are considering in order to meet retailer and consumer needs in mature and emerging markets, according to a white paper from Exel and DHL Supply Chain.
The four strategies and some of their advantages are described below:
• Outsourcing Primary Packaging - Outsourcing primary packaging, also referred to as contract manufacturing, can increase asset utilization, reduce new capital investments, help facilitate product packaging based on regionalized demand, and provide greater flexibility in responding to the changing marketplace. Leveraging contract manufacturing resources and postponing primary packaging to the distribution center network also saves the cost of changing manufacturing to accommodate product launches and shorter product life cycles and saves on transportation.
• Consolidating Secondary Packaging Locations - Consolidating secondary packaging, or co-pack, operations into an existing facility allows companies to postpone customization closer to consumption. This helps reduce order lead times, avoid carrying unnecessary inventory, enables just-in-time shipment of floor-ready displays and products for advertised promotions, and can result in less SKU and material obsolescence. Co-locating secondary packaging in an existing distribution or primary packaging location also eliminates transportation to and from the co-packer, reducing carbon emissions and eliminating potential product damage.
• Continued Regionalization of DCs - This strategy enables shorter order lead times, which allows retail customers to respond quicker to fluctuating consumer demand. It also reduces retail store inventory, product obsolescence and security burdens that come with managing large volumes of product in some regions. Manufacturers can reduce both inbound and outbound transportation costs by locating DCs near the plant or in multi-facility campus operations that provide access to intermodal facilities.
• Horizontal Collaboration - Manufacturers across the world are now looking seriously at collaboration as a way to drive supply chain efficiencies, share costs to offset continued sluggish growth and reduce carbon emissions in support of sustainability strategies. Sharing warehouse space and/or consolidating smaller shipments going to the same customer is a particularly effective strategy in emerging markets where insufficient infrastructure and lack of consistency among providers inflates the cost of entry and operations.
Integrating these strategies into a comprehensive FMCG supply chain solution creates synergies that provide benefits beyond the sum of each component's individual benefits. More information can be found in the white paper, "Consumer Goods Manufacturers Seek Greater Supply Chain Flexibility." It can be downloaded at www.exel.com/consumersolutions.
Source: Exel, DHL Supply Chain
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