An Overview of

Supply Chain in FMCG Sector

- Siva
09677193966

‘Chain to Excellence’
Session
What is a Supply Chain?

All stages involved, directly or indirectly, in fulfilling a

customer request.

Sourcing Manufacturing Warehousing Distributor

Planning (Forecasting):
-Demand for products and services is usually uncertain

Forecasting is used for…

Short Range Forecast (0-1 yr)
• Production and operations planning
• SCM (Sourcing, Inventory, Resources)
Medium Term Forecast (1-3 yr)
• Finance and accounting (budgets and cost controls)
Long Term Forecast (>3 yr)
• Strategic planning
• Marketing (future sales, new products)
• Capacity Planning
 Planning @ Nestle

Factor in Promotional activities, Trend, Seasonality, etc.

 Top Down Planning at HO

- Disaggregated Planning
- Based on Company Financial Targets

 Bottom Up Planning at Branches

- Aggregate Planning
- Based on Sales Push
Sourcing:

- Set of business processes required to purchase goods & services

Sourcing Processes involved:

 Supplier scoring and assessment

 Supplier selection and contract negotiation
 Design Collaborations
 Procurement
 Sourcing planning and analysis
Supplier scoring and assessment:

- Supplier performance should be compared on the basis of the

supplier’s impact on total cost .
Total cost is influenced not just by purchase price, but also by late or partial order
delivery, poor quality, supplier flexibility, viability, etc.

Supplier Selection- Auctions and Negotiations :

-Supplier selection can be performed through competitive bids, reverse

auctions, and direct negotiations

Procurement:

-The process in which the supplier sends product in response to orders

placed by the buyer (Direct and Indirect Materials)
Manufacturing:

Production Planning – Past vs. Future

- In-house (OEM) vs. 3P (CM)

Parameters considered:
 Technology
 Capacity
 Quality
 Govt Regulations
 Flexibility
 Reliability

Manufacturing facility layout strategies

– Process focus (high volume)

– Product focus (low volume)
– Fixed-position
 Warehousing

- A Warehouse is nothing but a storehouse

- General Strategy adopted across industry is FIFO

- Dedicated vs Random Storage Approach

KPIs in Warehousing:

-Space utilization
-Order fulfillment/rush orders
-Order picking and assembly
-Cross-docking, consolidation and break bulk, etc.

- Factors to be considered while setting a warehouse

- Hub & Spoke concept in Warehouses

- Impact of GST on current warehouses system

 Distribution

- Total Delivered Cost (TDC) is the primary concern

- Route Optimization

- Truck Utilization (optimal mix)

- 1PL to 4PL Strategy

- Hub & Spoke Model

- Clustering Algorithm

- Milkrun Strategy

- Relation between Inventory & Distribution Planning (DRP) across

companies
Inventory:

-The most fundamental role that inventory plays is that of facilitating the
balancing of demand and supply
- Excess Stock built to handle any Uncertainties

Pipeline Stock – Inventory stored to compensate Stock in Transit

E.g. The Warehouse holds extra 5 days of inventory if the Transit time between Plant
and WH is 5 days

Cycle Stock – Inventory to satisfy gap in replenishments

E.g. The Warehouse holds extra 10 days of inventory if its replenished only thrice a
month

Safety Stock – Inventory to capture other Variabilities in overall chain like Demand
Uncertainties, Supply Uncertainties, Transit delay, Service Level etc.

E.g. The Warehouse holds extra 6 days of inventory if its

Forecasting Accuracy - 80% , Service Level – 95%

Supply Accuracy - 90%, Avg Transit Delay – 1 day

 Inventory Classifications

By Process:

RM inventory, WIP inventory, Finished Goods Inventory

By Importance:

ABC Classification - assign relative priority to the right category.

E.g. A Class items are the high value items. Hence the inventory level is maintained at
optimum levels for A category and any excess inventory can have huge adverse impact
in terms of overall value.

By Cycle Time:

FSN Classification – Fast Moving, Slow Moving and Non Moving Inventory

By Nuisance Value:

VED Classification – Vital, Essential and Desirable Inventory

Others: SDE, XYZ ….

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