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Why do FMCG companies struggle to improve both availability and freshness together?
Almost every FMCG company I have interacted with has a major initiative to improve product availability. Many of these companies, especially with perishable or short shelf life products, also have an initiative to improve product freshness.
The irony is that these two are seen as separate initiatives. Moreover, the teams realise that actions envisaged under these two initiatives are inherently conflicting. For example, improving product availability through high inventory leads to staler products to consumers. Similarly, improving product freshness through reduced channel inventory results in poor availability. How do we resolve this conflict?
The solution lies in challenging the assumptions behind various supply chain policies, processes and practices.
One such practice is keeping high inventory at the last mile node facing consumers. The inherent assumption is that it would improve availability. Have you ever tested this assumption? If you do, you would soon realise that it actually leads to higher stockouts, as we commit the stocks too early and the ability to divert stocks from low demand to high demand locations gets more difficult.
There are several such assumptions which must be challenged, leading to changes in policies, processes and practices. Unless we do that, simultaneous improvement in product availability and freshness will continue to be elusive.