Impact of Third-Party Logistics on the FMCG Industry

on July 16 | in FMCG | by | with No Comments

When it comes to promotion, pricing, and distributing goods, the pinch that FMCG companies have experienced from retailers in the past few years is only tightening.

As retailers feel pressured to reduce prices and offer improved services to stay competitive against e-commerce giants such as Amazon, the pressure comes down to their already-stretched suppliers.

For medium-sized FMCG companies, this pressure is aggravated as they compete with firms that have the infrastructure and resources to cater to retailer demands. In such a competitive environment, FMCG businesses are now opting for third-party logistics, abbreviated as 3PL, to outsource certain elements of its distribution, sourcing, shipping, warehousing, and fulfillment services.

Here are some ways in which 3PL has impacted the FMCG industry.

1. Economies of Scale

The FMCG industry is a highly-price sensitive industry, and consumers usually opt for brands that offer them the best value for money. Thus, the cost benefits of 3PL can be incredibly beneficial to companies that aim to acquire new consumers.

With a 3PL partner, medium-sized FMCG companies can scale up swiftly out of their local area and venture into international markets. They can become agile enough to meet demand with a continuous stream of supply.

2. Saves Time and Effort

Imagine your supply and distribution department making several calls, searching for quotes, performing multiple calculations in their already busy day. FMCG companies are now doing away with all of this and reinventing the process by outsourcing to a 3PL service provider.

It’s easy for businesses to believe they can do everything themselves. However, using a 3PL service provider to outsource order fulfillment to a credible partner allows FMCG companies to devote their precious time to other business aspects that offer more value addition.

3. Cross-Docking to Lower Storage Costs

FMCG companies often don’t have the proper resources and systems to execute cross-docking on their own and are using 3PL to help them out. With cross-docking, incoming products are broken down by receipt, cross-checked with outstanding orders, and then promptly dispatched for delivery. This significantly lowers inventory, delivery lead times, and costs associated with labor, transportation, and storage.

Even though cross-docking isn’t easy, it offers a high payoff. Cross-docking allows for satisfied retailers as they will get less accurately-timed shipments, needing less receiving staff and dock doors.

Use A 3PL’s High-Level Distribution Infrastructure to Gain a Competitive Advantage

It’s getting increasingly challenging for medium-sized FMCG companies to compete. They simply aren’t able to obtain the mindshare with retailers that other major brands get. Plus, they don’t have the freight volumes needed to enhance efficiencies in the supply chain.

However, this is where 3PL plays an extremely strategic role, offering the high-level infrastructure that you want but cannot afford to develop.

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