The FMCG supply chain is a complicated process impacted by a range of ‘flows’, most of which exist in any warehouse space but which are more demanding because the nature of FMCG (fast moving consumer goods) requires swifter and often more transport sensitive logistics.
The flows that influence FMCG warehousing
- The first flow is physical – the transit of goods from supplier to warehouse to customer
- The second is informational – upstream and downstream data-flows: purchase orders, refunds, supply orders etc
- The third flow is financial – payment for supplies, receipts for orders, pro forma invoices, refunds etc.
Some of these are internal flows – exchanges of goods or information that the place within the organisation (although not necessarily within the warehouse) whilst others are external, exchanges between the company and various partners such as distributors, suppliers, transporters etc.
There are several ways of defining FMCGs; the sector as a whole includes beverages (hot and cold), cosmetics, health products (vitamins etc) and processed foods. There are some products that are either FMCGs or CPGs (consumer packaged goods) depending on the definition chosen, such as: toiletries, consumer electronics, tobacco products and substitutes, alcohol products etc.
Another way of defining FMCG is that these are goods of lower durability, higher demand, and lower prices, making them quick to sell, necessary to replenish regularly and price competitive with rival products.
Optimising a warehouse for FMCG
- The first challenge is the demand for FMCGs to move faster, often in time sensitive periods as short as a couple of days.
- The second is that FMCG products tend to have greater warehousing and logistics costs than other products – requiring temperature or humidity controlled transport, more frequent assessment and tighter protocols
- Third, FMCG goods are often more fragile than other products, as well as being less durable. Ice lollies both melt and break, cigarettes require a humidity control as well as being easily broken or crushed and alcohol is often fragile in terms of transportation but also a high insurance risk because it is such a valuable commodity etc.
First Step – ensure your supply chain is adequately scaled
For FMCGs in particular supply chain reliability is paramount. De
lays and disruptions aren’t just challenging, they can be extremely costly – this means focusing on preventative maintenance, alternative routes, and contingency logistics plans for bad weather/travel disruption/strikes. For many warehouses stocking FMCG this means a greater investment in logistics, such as automation and/or 3PL (or other external service provision) to try and reduce risk in the supply chain. Constant review of the supply chain processes is also vital to improve efficiency and responsiveness.
Second Step – optimise warehouse space
Grouping together products that require the same preparation process can be a key stage to successful FMCG warehousing. Slotting – allocating product locations – should be designed to ensure that each order takes the shortest amount of time to prepare and ship. This can include looking at kitting, labelling and co-packing as these are often part of FMCG management and can substantially slow down the fulfilment and logistics elements of warehousing. Options where include developing an in-house packing and labelling system or choosing a partner who can provide same day shipment after the activity has been completed. Clearly there are trade-offs. If an in-house operation is chosen, it limits ware
house space for stock, however if these activities are outsourced, an added logistics burden (and time component) to your operations.
Third Step – make sure you have FEFO as standard throughout your warehouse
For many CPGs and virtually all FMCGs a FEFO policy is essential. FEFO – First Expiry, First Out, is a simple process that ensures short life goods are regularly rotated so that those with the quickest expiry are shipped out first. If you’re choosing a warehouse management system (WMS) then making sure that it has FEFO as an in-built capacity can both simplify and speed up warehouse operations, both in-bound and out-bound.
Fourth Step – Explore options for warehouse replenishment
There are three distinct forms of warehouse replenishment each of which has its advantages and disadvantages:
- Day demand replenishment – also called ‘wave replenishment’ is where the stock that is projected to be needed for that day’s operations (the wave) is moved to pick locations. This system is particularly valuable for smaller warehouses or for those with small pick numbers ie specialist, higher value stock
- Top off replenishment – also called ‘lean time replenishment’ means that each location is filled to capacity (and with back-up stock nearby) during warehouse down time. This system works exceptionally well for warehouses that have short picking windows, usually those with high-demand fast-moving SKUs such as seasonal stock, fruit and vegetables, and other perishables.
- Opportunistic replenishment – this is the most complex replenishment system, based on accurate forecast demand. The necessary amount of inventory for between two weeks to a month is set up on picking locations. This method improves warehouse productivity because it reduces the number of restocks required, but it also requires a larger pick face which precludes smaller warehouses benefitting from it.
While it can seem obvious which system will work best for your FMCG warehouse, it’s valuable to review and experiment with replenishment approaches to improve productivity.
Fifth step – Consider cross-docking
Cross-docking can be particularly useful for FMCG warehousing space, although the consumer goods that are cross-docked need to be carefully considered. At first sight it might seem that the fastest moving and most perishable goods are the ideal candidates for this approach but actually goods that have high fragility or temperature monitoring requirements may need a period in warehouse space for monitoring before onward transmission. However, in many cases cross-docking – moving goods from one lorry onto another without storing in between, can be a time and money saver.
Finally, when working with FMCG, one of the most important considerations is to keep warehouse staff up-to-date with regulations and training, as these goods can be the highest risk in terms of perishability and damage. There are often insurance implications to the storage and movement of FMCGs and thorough personnel training can reduce risk and improve FMCG management, which in turn reduces insurance premiums and prevents to need to make claims.