The Supply Chain is Permanently Transformed
How Has the Supply Chain Changed?
A New Definition of Fast-Moving Consumer Goods is Here
Fast Moving Consumer Goods (FMGC) have been traditionally defined by less costly, often perishable or consumable products. This category generally covered things like food and beverage, toiletries, and cosmetics. The market for them was driven by the combination of steady demand and the impermanence of the products themselves.
However, COVID has substantially changed the very definition of the FMCG category. According to Goldman Sachs the accelerated growth for the FMCG segment of the ecommerce space is running approximately five years ahead of pre-pandemic projections. This is driven by an incredible 44% year-over-year increase in online consumer spending in 2020 – the highest annual U.S. eCommerce growth in at least two decades and nearly triple the 15% jump in 2019. Overall, it’s a huge market, and many of these changes will stay in place long after the pandemic has ended.
Storage, Fulfillment, Warehousing and Transportation Realities Have Changed
Countless items have been part of this unprecedented shift. One perfect example is the effect of the change on toys and games. As people isolated in their homes, families with kids (and many other folks) began ordering puzzles, hobby kits, and games in increasing volumes.
In addition to changes for consumers, warehouses have felt the tectonic-level changes as well. Microtrends are being seen, such as the optimization of physical space for storage and shipping. Despite the real estate market adding inventory at record rates, usage and availability of warehouse space will remain at a premium. Companies are paying close attention to ways to make the most of the storage space they have and are using technology and automation to make their labor force more efficient. This ensures that goods keep moving through the system and into customers’ hands.
COVID has caused substantial disruptions to the kind of products that thought to comprise the FMCG segment. The home is the new front line for health, safety, work, and family. Products like toilet paper, cleaning supplies, disinfectants, and cereals sky-rocketed in popularity. This begs the question if the effect is long-term, and what will the future look like in any eventuality? Will consumers remain more home-centric or will they drift back to the patterns that were evident in 2019?
All the categories mentioned so far: home cleaning, home-working, cooking, exercise and entertainment certainly have durable goods elements. However, FMCG contains scores of associated products that are currently selling incredibly rapidly. Did you just buy new kitchen equipment? You’re likely to complement that with the platters, plates, cookware, and food to go with it. This downstream effect is an enormous driver of the fast-moving products market segment. It has essentially changed the definition of what exactly comprises the FMCG category.
Partners all along the supply chain must adapt to these changing conditions. That means studying consumer buying behaviors and patterns and identifying the technologies that support the new way products are being shopped for, ordered, received, and consumed. The shift to ecommerce (whether a seller’s own website or a marketplace like Amazon) was already happening, moved faster as a result of the pandemic, and is likely to stay. That results in a supply chain shift in packaging, for example, that focuses on unit packages that can go directly to consumers (rather than from producer to reseller) with technologies and processes that support this different model. It is also driving a move to mega-distribution “mixing” centers that consolidate many brands and products.
Massive societal events often have far-reaching and long-term impacts on economies and markets. The Great Depression molded the way generations of Americans spent, saved shopped and thought about their relationship with consumer goods. The COVID-19 pandemic is likely to have some of the same kinds of effects. Many people will never buy toilet paper (or other similarly necessary goods) only when they are nearly out ever again!
The time is now to reimagine the supply chain, support change, and seek opportunity to convert legacy infrastructure to automated facilities that support B2B, B2C, and marketplaces. FMCG companies that embrace a supply chain that can directly reach consumers wherever their products are purchased have the greatest opportunity for success in the coming years. The good news is there are experienced, trusted partners like Kenco that have been supporting this supply chain model for decades. To learn more about Kenco’s FMCG supply chain solutions, click here.