The global FMCG logistics market is estimated to grow at a CAGR of 4.6% between 2020 and 2027. The market for fast moving goods stood at $1,056 billion in 2019 and is expected to reach $1400 billion by 2027.
The FMCG logistics industry is expected to grow for each mode of transportation. But sea freight is likely to show the most growth to transport fast moving goods. The FMCG market is highly competitive. Brands operate with tight margins. They rely on high sales volume to turn a profit.
FMCG logistics is not limited to distributing inventory to retail outlets and supermarkets. Australian shoppers are turning to eCommerce to buy all kinds of fast moving goods. The below graph shows the share of purchases made online by Australians. Many of these categories fall under fast moving consumer goods. This includes department stores, grocery and liquor, and personal care.
These products have unique characteristics. You need to understand these characteristics to ship FMCG products.
In this article, we will understand consumer fast moving goods and their unique supply chain management strategies. We will understand how FMCG logistics and distribution are different from other products. The article will also cover eCommerce order fulfilment for fast moving goods.
What are Fast Moving Consumer Goods?
Fast Moving Consumer Goods (FMCG) refers to a product category. This category includes products that are priced moderately and sell quickly. These products are frequently purchased within specific intervals. They are also known as Consumer Packaged Goods (CPG).
Most FMCG products have a short shelf life. Some of them may also be perishable. These are the products that you would usually find in grocery stores, convenience stores or hypermarkets. Fast moving goods have high inventory turnover rates. Owing to their low shelf life, they need to be cleared fast. These goods are usually sold at a low-profit margin but have high sales volumes.
Types of Fast Moving Goods
The fast moving consumer goods category further contains several sub-categories. It includes a wide range of products from packaged foods to cleaning liquids. Let’s understand the various types of fast moving goods.
Beverages: FMCG products include packaged beverages. This includes bottled water, energy drinks, aerated drinks, juices, and so on.
Packaged Food: There are different types of fast moving goods in this category. It includes processed food products such as cheese, butter, cereals, pasta, chips, biscuits, sauces, etc. It also includes baked goods and packaged ready-to-eat meals.
Toiletries: Consumer fast moving goods include toiletry items such as soaps, toothpaste, shampoo, floss, grooming products, and more.
Cleaning & Laundry Products: This category of fast consumer moving goods include items like baking soda, disinfectants, bleach, clothes washing liquid, utensil cleaning products, etc.
Personal Care & Cosmetics: Fast moving consumer goods also include things that you would use for personal care such as skin creams, sunscreen, body wash, deodorants, concealers, etc.
Over-the-Counter Medicines: These are the medicinal products that you can buy without a prescription. These are aspirins, pain relievers, band-aids, cough pills, and so on.
Stationery: This type of FMCG goods includes things like diaries, pens, paper clips, staplers, markers, post-it notes, and more.
Fresh Produce: Alongside packaged food products, consumer fast moving goods also include fresh grocery items including vegetables, fruits, dairy products, meat products, and so on.
Confectionery: This type of fast moving goods includes sweet treats like candies, nuts, chewing gum, chocolate products, ice cream, toffees, and more.
There are different types of fast moving goods from various categories. All of these share a few characteristics.
Characteristics of FMCG Products:
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Frequently Purchased
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Short Use Cycle
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Low Prices
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Short Shelf Life
Owing to these characteristics, FMCG logistics supply chain management works differently from other industries.
4 Major Challenges for FMCG Logistics
Fast moving consumer goods have a high inventory turnover rate. Hence, supply chain management for these products needs to be fast and agile. It also needs to be highly accurate owing to the low shelf life of FMCG products. Let’s see how supply chain management works for the fast moving goods industry.
1) Supply Management for FMCG Products
Fast moving goods are usually supplied directly by the manufacturer. The majority of consumer fast moving goods in Australia are imported. According to World Integrated Trade Solution (WITS), imported consumer goods make up 44.29% of the market share.
This means that most companies would need to ship moving goods internationally. This coincides with the estimated growth of sea freight for FMCG logistics. So the supply is subject to issues and hindrances of global supply chains. Among all the various types of fast moving goods, food and beverages contribute significantly to global international trade.
These are highly perishable products. Hence, you need a continuous supply to meet consumer demand. This can get difficult as the global supply chain pressure index keeps increasing. At the same time, you cannot overstock the products either because of their low shelf life.
This dilemma holds for many of the FMCG products. The uncertainty of international supply combined with the perishability of the products makes FMCG logistics highly dependent on the accuracy of demand forecasting and efficiency of supply management.
You need to predict the overall market demand for your products to understand two aspects. First, the supply volume for different SKUs. Second, the frequency of supply. You need to consider the shelf life and consumption rate of the products.
The other important factor to consider is supply lead time. This is especially important if you ship fast moving goods from international manufacturers. While you need to plan supply based on demand forecasts. You also need to consider the possible uncertainties of international trade.
International imports go through several stages of transport. Hence FMCG logistics would involve certifications, customs clearance, international freight shipping, port pickup, domestic freight shipping, and so on. You also need to account for delays at any of these stages.
You need to align your supply chain management strategy for all these factors to deliver fast moving goods to your storage facilities for domestic distribution.
2) Inventory Management for FMCG Products
Inventory management begins once you deliver FMCG products to domestic storage facilities. This can be a central warehouse or distribution centre. This stage mediates the supply and consumption of different SKUs.
Consumer fast moving goods have a high inventory turnover rate. Hence, you need to consistently manage the inventory levels based on the supply cycles and inventory consumption. Fast moving goods have low shelf life. So overstocking would lead to wastage and losses.
At the same time, a lean inventory management strategy may also need to be revised for FMCG logistics. Even minor delays in supply can lead to shortages. This in turn may result in loss of market share. Fast moving goods are need-based products. If your brand is not available for purchase, the customers might turn to the competitor’s products.
Another major challenge for FMCG inventory management is tracking different SKUs. FMCG brands typically deal with a variety of products from different categories. Each of these has unique requirements for inventory management.
Alongside managing inventory in the warehouse, you also need to manage outbound inventory. Each SKU will have varying demands in different markets. You will need to track inbound and outbound inventory to manage inventory levels. This can get complicated if you are using an omnichannel retail strategy. The distribution channels would include retail outlets and eCommerce.
You will need to predict the demand for each of these channels. You also need to estimate sales through these channels in different markets. Based on this, you can ship fast moving consumer goods.
Then you need to track the total outbound inventory to record depletion in the inventory levels. Finally, you define the replenishment cycle based on these factors and supply lead time for different products. This process will help you create a perpetual inventory system to keep your supply chain running.
3) Logistics and Distribution for FMCG Products
Before you can deliver fast moving goods to the consumers, they need to reach the target markets. FMCG products are often widely distributed to different target markets. Each target market would have several points of sale. These would include supermarkets, hypermarkets, grocery stores, etc. You will also need to stock your fulfilment centres for eCommerce order fulfilment.
An FMCG logistics strategy involves distributing the inventory from the central warehouse to each of the sales channels. Here too, you need to consider the demand forecast for each target market and channel. You also need to consider the consumption rate and storage capacity of each channel and target market.
Based on these factors you need to decide the outbound inventory volume for each market. Then comes the task of defining a distribution strategy for each target market. Fulfilment and distribution logistics involve creating a streamlined process for supplying the right inventory in the right volume to the right destination at the right time.
FMCG logistics strategy depends on several factors. These include the distance between central inventory and points of sales. You can use smaller distribution centres closer to different target markets to reduce this distance.
In such cases, you first ship FMCG products to the regional distribution centre. This centre serves as the inventory repository for the region. Then you drive fast moving goods to individual points of sale based on the demand.
You can employ various logistics distribution strategies to transport fast moving goods. You can directly ship fast moving consumer goods from the central or regional warehouse. You can also use indirect shipping through a cross-docking strategy.
Each of these strategies has its own advantages and disadvantages for the fast moving goods industry. You need to identify the ideal strategy for your business based on three factors: Distance, Shipping Volume, and Delivery Lead Time. Considering these factors will help you identify the best vehicles, routes, and distribution strategies to ship FMCG products. You can also estimate the cost of shipping based on these factors.
4) Order Fulfilment for FMCG Products
Order fulfilment is no longer limited to FMCG eCommerce. Consumers prefer to choose from a variety of different fulfilment options when buying online. People can buy fast moving goods online and then collect them from stores. This click-and-collect fulfilment option was used by 72% of Australian shoppers in 2022.
You need to distribute the inventory based on the fulfilment options your customers prefer. The fulfilment centres as well as retail outlets should be able to deliver fast moving goods to online shoppers. You can also employ eCommerce micro fulfilment solutions to serve customers in a target market. Even your retail stores can serve as micro fulfilment centres.
You can use these locations to courier FMCG products to online shoppers. Customers can also order goods online and collect them from these locations. However, you will face a few challenges with FMCG order fulfilment. These stem from perishability and high inventory turnover rate of fast moving goods.
Additionally, eCommerce customers show a preference for fast and free delivery. These factors have a significant influence on purchase decisions. Furthermore, 25% of shoppers would abandon a purchase if the retailer did not offer same-day delivery.
So you need to create an order fulfilment process to deliver fast moving goods as quickly as possible. You also need to consider that FMCG products are need-based and perishable. Hence, most customers expect brands to deliver fast moving goods to be delivered on the same day.
Your order fulfilment strategy should be able to ship fast moving consumer goods under such tight deadlines. Let’s see how you can streamline order fulfilment to live up to customer expectations.
Shipping Fast Moving Consumer Goods
Before you can ship fast moving consumer goods, you need to streamline distribution and inventory management. All aspects of order fulfilment depend on having enough inventory in stock to fulfil the order.
Furthermore, you need to distribute the FMCG products to be as close to the customers as possible. This is necessary to ship moving goods as fast as possible. You can adopt a micro-fulfilment solution for same-day & next-day shipping options. Let’s how order fulfilment works for FMCG eCommerce.
Order Processing
The first step to delivering fast moving goods is processing the received order. The order processing part involves allocating the order fulfilment task to the right inventory location. This can be a warehouse, retail outlet, fulfilment centre, or micro-fulfilment centre.
At this stage, you receive information regarding the order and the customer’s details. Here you cross reference the order with your inventory. You check whether the ordered FMCG products are in stock at the nearest fulfilment centre.
If the customer has picked a click and collect option. Then you need to direct the order to the fulfilment centre closest to the customer. If you are using same-day courier service to deliver fast moving goods. You will also assign the task to a local courier service or 3PL partner. This part is also initiated at the order processing stage.
Packaging
Once the order is assigned to a location, you can begin the process of shipping fast moving goods. The fulfilment centre picks the FMCG products from the inventory. The picking process depends on how the inventory is organised.
However, for more speed and efficiency, many fast moving goods industry use different types of micro-fulfilment technology. This includes robotics, automation, and AI. This allows you to automatically pick the order from the inventory.
The picked FMCG products are packaged based on the shipping distance. If you have to transport fast moving goods over significant distances, you will need sturdy packaging. However, you can use courier satchels for local deliveries.
Shipping
Once the products are packed, you can dispatch them for shipping. This process depends on your last-mile delivery strategy. If you are using your own fleet of vehicles, you can directly dispatch the orders from the fulfilment centre.
On the other hand, you have two options if you are using a local point-to-point courier service. You can either store the inventory with the logistics partner. They can dispatch the orders directly from their local courier facilities.
Or you can arrange for a pick-up solution. The logistics partner picks up the order from the fulfilment centre. Then they courier FMCG products to the customer’s address.
Tracking
Fast moving goods industry relies on fast shipping. So the order tracking time is usually short. Despite this, customers prefer brands that offer order tracking. This is true even if you are offering same-day shipping.
87.4% of customers say that real-time tracking has a significant impact on their purchase decision. This is all the more important for shipping FMCG products as many of them are need-based. Furthermore, this feature also contributes to customer loyalty.
You can provide GPS tracking if you are using your own fleet to ship fast moving goods. Or you can extend the tracking technology of your courier partner to the customers. Tracking also helps you measure the performance of your last-mile delivery process.
Delivery
The last step of FMCG order fulfilment is to deliver fast moving goods to the customer. Although it is the last and shortest step, it plays an important part in customer experience. This is the last point of contact between the customer and the brand.
At this stage, you deliver the FMCG products and collect the proof of delivery. You can also add other processes to this stage. You can include customer satisfaction surveys alongside delivery.
Streamline FMCG Logistics for Faster Fulfilment
As the fast moving goods industry depends on low margins and high volumes, FMCG logistics needs to be fast and efficient. This allows you to deliver fast moving goods within a day to eCommerce customers. As the majority of FMCG products in Australia are imported. You also need a reliable international courier freight to import and distribute your inventory in the country.
You can also use logistics services, like PACK & SEND, to distribute the FMCG products to retail outlets, supermarkets, hypermarkets, and other stores. Furthermore, you can also use local courier services to ship FMCG products for order fulfilment.
FAQs
What is the logistics cost of FMCG?
The average cost of logistics in the FMCG industry can be up to 10% of the cost of sales. The logistics cost is the highest in the consumer goods industry. Although this value may change based on several factors. These include the location of target markets, distribution strategy, shipping volume, and so on.
How to ship fast moving goods in Australia?
You can use a logistics partner to ship fast moving goods in Australia. There are several strategies to ship FMCG products. However, a 3PL service can give you access to a variety of logistics resources without the need for upfront investment.
Logistics companies, like PACK & SEND, can ship fast moving goods in Australia to several target markets. You can distribute inventory to retail outlets and supermarkets. You can also use the logistics network for eCommerce order fulfilment of your FMCG products.
How do 3PL service providers help in shipping fast moving goods?
A 3PL service provider can help you with the logistics part of shipping fast moving goods. This includes storage, inventory management, distribution, transport, and order fulfilment. You can hand over the inventory to the 3PL service provider.
Then the 3PL distributes the FMCG inventory to designated retail stores, hypermarkets, grocery stores, and so on. They would also ship fast moving goods to fulfilment centres to deliver eCommerce orders.
How to ship fast moving goods efficiently?
You can ship fast moving goods efficiently by streamlining the distribution and order fulfilment processes. You can also use automation for several processes to help you speed up the shipping of consumer goods. FMCG eCommerce can also partner with a logistics company to ship fast moving goods efficiently by using their vast network of logistics resources.