Interview – Indian FMCG firms cut product variants on supply chain nightmares due to pandemic lockdown

Major players in India’s vast fast moving consumer goods (FMCG) segment are being forced to resort to desperate measures such as cutting back on product variants after their regular supply models were battered by the lockdown triggered by fears over spread of the coronavirus pandemic.

Supply chain managers of leading FMCG are battling logistics nightmares because of different kinds of closures that were expected to continue for the rest of the year, Umesh Madhyan, Associate Vice-President (Supply Chain Strategy & Transformation), Hindustan Coca Cola Beverages, told in an interview.

The federal and state governments have clamped restrictions on areas with high infections, but are now allowing shops to reopen in various forms and at various days and times. While there are overall regulations issued by the federal government, the states are also making their own rules to stem the spread of the virus.

Umesh Madhyan, Associate Vice-President (Supply Chain Strategy & Transformation), Hindustan Coca Cola Beverages

“We have three kinds of notified zones – red, orange and green and you are not sure when these pockets will change their colours. And immediately changing distribution module to different markets is a major challenge,” Madhyan said

The distributors- and stockists-based general trade model strongly linked with consumers is also in disarray resulting in FMCGs tending to sell more through online channels.  

“The imperative of sudden channel shift is also keeping us on our toes,” Madhyan added.

Commenting on efforts by FMCG companies to keep their heads above water, Madhyan said the big players had cut down their stock taking units (SKUs), which in FMCG parlance means product categories and variants as listed in a company’s catalogue.

“Most of the leading FMCG firms are resorting to massive cuts on SKUs, even more than 50 percent in some cases. Companies are sticking with SKUs where they feel the return margin on cost to serve metrics is better and secondly, they are mostly channel agnostic,” he said.

Madhyan also emphasised that the current SKU-specific strategy will continue for sometime and this may result in non-availability of some popular products in small sizes. 

“Just to cite an example, in two-three months from now when the market hopefully gets in a regular mode, you are unlikely to readily find small shampoo sachets. Companies would rather prefer to push bigger packets in the market because of cost to serve considerations,” he added.

Commenting on the possible recovery scenario as discussed within FMCG circles these days, the man who plays a critical role in guiding one of the largest supply chain systems of a consumer-facing company in the country, said there isn’t much hope from 2020. 

“If in 2021, we manage to reach the numbers we had set for 2020, that would be a great achievement. If we stay close to 2019 numbers next year, that would be very disappointing again. But nothing can be said at this stage,” he added. 

Ritwik Sinha chased trucks in his childhood, without realising logistics would become a deep love for him. Inherently a television man, he now spends long hours interviewing key people for our very popular YouTube channel. Podcasts are next on his list. In his free time, Ritwik is either looking for a warehouse filled with commodities or hitching a ride on a cold truck – all of which yields great stories!

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