Consumer Supply Chain

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Fast Moving Consumer goods are those products that have a limited shelf life and they are categorized into several different ways according to its usage. Consumer goods are not just strictly limited to what is bought in store but it also involves items that are home delivered, markets and stalls etc. Fast moving consumer includes items such as fruits and vegetables, diary products, sugar and other drinking necessities. Another category of products that can also be included under FMCG are durable goods. The Food and drink supply chain has been a linear relationship involving the primary producers, or farmers, the manufactures or processors who fabricate the food for table and the retailers who gather a range of such products and sell them to the consumer (Jane F.Eastham, Liz Sharples, and Stephen D.Ball, 2001).

FMCG business rests on the two pillars of brand equity and distribution network. In FMCG products, brand equities are relatively stronger as the consumer is reluctant to try unknown brands/ unbranded products as most of these products are for personal use. It is often difficult to differentiate a product on technical or functional grounds and therefore little reason to switch from a known brand. According to Keller (2004) a successful brand generates strong cash flow, which enables the owner of the brand to reinvest a part of it in the form of aggressive advertisement/ promotion to reinforce the perceived superiority of the brand. The worth of a brand is manifested in the consumer's insistence on a particular brand or willingness to pay a price premium for the preferred brand.

In FMCG sector, one of the most critical success factors is the ability to build, develop, and maintain a robust distribution network. Availability near the consumer is vital for wider penetration as most products are low unit value products and frequently purchased. Supply chain takes enormous time and effort to build a chain of stockists, retailers, dealers etc and establish their loyalties. There are entry barriers for a new entrant as a new product is typically slow moving and has lesser consumer demand. Therefore dealers/ retailers are reluctant to allocate resources and time. Established players use their clout to inhibit new entrants (Mohan, 2005). However, when a product offers a strong breakthrough, equity we build up rapidly and so does the supply chain network. Moreover as the supply chain environment has improved with better infrastructure, mere availability of products at retail outlets is not going to be enough; a value proposition is needed to break the increasing clutter of products (Sarwate, 2004).

In United Kingdom as mentioned in the introduction (food and grocery) is a major economic player and the makes a significant contribution to the gross national product. It employees over 3.2 million people, which represents 16% of total UK workforce (Mark Francis, 2006). Compared to all other industry the food industry is the most complex of all supplying to the general public .In the UK supplies of food and drink have not only been outsourced within but comes from different parts of the world. Supply chain has been defined as a network of organization that are involved through the upstream and downstream linkages in different process and activities that produce value in the form of products and services in the hands of the ultimate customers (Christopher,1992). FMCG supply chain also like any other supply chain retailers, manufactures are now looking forward to reduce there lead time to make the product reach the customer at a fast rate. It is important note that the food supply chain has been very slow in responding to the success of the motor industry and in recent years progress has been made in food supply chain.

Basic structure of Food supply chain


Physical Distribution



Raw material Production


In the today's turbulent and uncertain world many companies in United Kingdom and around the world are trying to mitigate the risk and create more resilient supply chain. In United Kingdom most of retailers have collaboration with its manufactures/assemblers in supplying the products at faster rate. One of the biggest example is the diary products industry where some of the UK' s top retail grocery shop Tesco's, Sainsbury etc have collaboration with farmers in supplying products to these retailers. In today's world these retailers are trying to provide customers products by making uses of customers driven system to respond to customers demand there by trying the reduce the lead time to much more smaller period. Here the supply chain are being transformed by quantum leaps in technology, rapidly changing consumer demand and the need to take a global viewpoint (Bob Low son, Russell King and Alan Hunter,1999).It is also important to note that these FMCG have either similar or the same kind of supply chain activities. For example the supply chain activities of durable goods would be different from that of perishable products like milk or any other fresh produce. In the united kingdom there are number of sector for food and drink supply chain and it is subdivided into agriculture, horticulture, fisheries and aquaculture which are the primary producers, then the manufactures ,wholesalers, retailers at each stage of supply chain. As in any country the food chain started in uk with primary producers, the farmers and the fishing industry.

Various stages in the Food Supply chain






P: Producer CON: Consumer SME R: Small/medium sized retailer LR: Large retailer

2.1.1Dairy Industry

In the United Kingdom as shown above in the figure the farmers are going back to the traditional way of supplying to the consumers directly. It is estimated that about 200 Farmer markets are now generating an extra of pound 65 million in sales for the agriculture industry (Brown ,2000).Take into account the two of the most important industries in the UK the fresh produce and Diary industries supply chain process has to be at a constant pace due to its perishable nature. United kingdom is the seventh largest milk producer in the world and it has changed dramatically over the large 40 years .In the united kingdom the diary industry is one of the most fiercely competitive and semi intensive livestock industry sector and for the first time it has brought together the processing and farming organization together in England, Wales, Scotland, and Northern Ireland. This Giant step have a created a great impact in the supply chain activities in one way or the other. The production of milk in UK is between 13 to 14 billion liters a year which is then converted into a wide variety of diary products. Almost half of the milk produced on farms in the UK is processed into liquid milk. Almost bulk of the output from the diary industry is intended for consumption by consumers.The Diary industry accounts for around 18 per cent of UK agricultural production by value and is the single largest agricultural sector at 2.8 billion. Annual production is around 13.7 billion litres.In UK there are four major dairy companies who process 85% -90% of raw mik.The report has shown that has there has been decline in the liquid milk consumption according to Dairy Council Figures.According to this the uk milk market figures in 2002 uk showed

  • 48 % of raw milk was processed into liquid milk

  • 25 % into cheese

  • 13 % milk powder

  • 15 % into other products inculding cream and butter

But over the past years there were issues that has happened in the Diary industry.As conumers started being from aware of the environmental aspect of these industries they where concerned on weather the products are coming through the right channel of distribution with the right quality .Not only consumers but also suppliers of these products where also concerned about the power that was in the hands of large retailers and amount of pressure that they could have on them.The British Dairy Farming industries future affects people, the environment, Countryside, food quality, and security, local communities and the economy. It has also been founded out in a recent survey conducted by the milk development council of diary farmers found that 16 % of diary farmers are planning to leave within next two years and the production could fall by as much as 900 million litres or 7 %. The reduction in dairy farmers in 1995 was 28000 in England and Wales which reduced to 13000 by the end of 2006. (Press Briefing)

The dairy supply chain as all other agri- business is complex. The dairy supply chain technically starts at raw milk production and ends with processors, institutions and consumer utilize products that were created in value chain. Companies such as Nestle, Danone etc are moving towards where there is growth in consumption and there has decrease in the diary processor going out of commodity processing and shifted into branded value added products. (Bill Vorley, Corporate Concentration from Farm to consumers))

2.1.2 Fresh produce Industry

The other industry that has to be taken into account is the fresh produce industry of the UK.In the united kingdom the fresh produce industry has been historically lagging behind the manufaturers of FMCG in its approach to merchandising and marketing(Andrew Fearne and David Huges,1999).t is also a point to be noted that year on year the consumer spending on food has been increasing on all the sectors and the consumption of fruit and vegetables is the largest among the other food sectors.The united kingdom is 80% self sufficient in vegetables and but below 20% self-sufficency in fruit.The Uk fresh produce aaccounts for 12 % of total expenditure on food with retail selling value of over 7 billion pounds(Micheal O keeffe and Andrew Fearne, 2002).Now a days the reailers describes fresh produce as destination catogeory for which it does'nt take much time for shoppers to choose and switch shops.Over the last 15 years the trend in fresh produce has changed and it has moved form back of the store to front and has doubled its shelf are in store. It is important to note that tht Food safety act of 1990 had a great impact on the evolution of this industry.This act made sure that the supermarket buyers take resonable step to ensure that Food that is recived from the suppliers is on safe quality.The fresh industry (fruit and vegrtable)can be taken in the form as a dumbbell where two weights on both side represents production and marketing and in between both a narrow distribution channel.The fruit and vegetable industy has been taditionally fragmented and some links have performed well while others have caused bottlenecks.It is noticed that in perishable commodities contractutal or integrated exchange arrangements are more commom than in storable commodities(Natha wilson,1996).

Over seventy years grocery and supermarket stores have evolved into the modern market place as the most convenient and diverse business in the world. In the uk there is intense competition between the grocers four of the major being Tesco,Asda,Sainbury and Safeway. Not only these major Grocery stores but also others make use of many of the products from the fast moving consumer good sectors and these two industries namely the fresh produce and Diary products which are bought in bulk from the major suppliers.The uk grocery industry is the third largest in the Eureopen Union and the two industry Fresh produce and Diary have a constant relation with both these industries in supplying products to the grocers.Both these industries supply chain activties has made use of partnerships or colloboration to work with each other in many ways.Even though such activities are taking place between them there is still argument on the way how the power is dominated and there are still some inefficiencies in supply chain and how this can affect the cause of these industries working.However despite this intense competition and power strugggles both these industries work closely together and recoganize the importance of supplying the product to the consumers (Andrew Cox , Paul Ireland , Chris Lonsdale , Joe Sanderson and Glyn Watson , 2002).

Over the years Fast Moving consumer Good industry are trying many innovative ways to make the product reach the customer by trying to have alignment with the top grocery retailers there by trying to reduce the lead time of the product by ensuring customer satisfaction.