Sorry to be a little direct right at the start but make no mistake Mr/Mrs. FMCG Producer, YOU put the stock there, oh yes you did! Distributors don't buy stock for a laugh and a giggle as they like full shelves. Excess stock blocks up their shelves and warehouses and, most critically locks up their cash. Yes, the cash you are desperately trying to collect and book in the accounts to meet your month-end commitments.
Let us take a look at the 7 deadly sins of excess stock:
- Month, quarter and year-end push. "Targets have to be met so push as much stock as possible into the Distributors. Even if they have no chance or intention to sell it."
- Failed launches. Unrealistic Producer sales objectives leading to slow moving and eventually expiring goods. Slow movers and expired all form part of Producer stock value and Distributor sunk cash until you do something!
- Old label/pre-relaunch stock. Perfectly good stock but the pack with the new artwork is being sold already and nobody wants this variant. Some careful planning in advance could see older stock liquidated in a sink market or moved out through discounting.
- Old and expired promotions. Funding support has ended and the guys with the best cars have moved onto the next “big thing” so what do we do with all these left over promotional packs? Disassemble, discount or destroy but don’t keep lying around!
- Returns from customers. Still arguing about who is to pay for these returns? Was a return policy agreed in the first place?.
- Producer forecasting errors. Nobody wants to lose face at Producer HQ so the excess stock sits and gathers dust until the annual stock count and later expiry.
- Damaged and expired. Is it clear who pays for any damages and expired goods? Make a decision and either re-sell or get this stuff off the books. Inevitably, damages will happen but get them written off quickly AND destroyed and get over it. You can avoid expired goods – see all of the above!
You might think your Distributors have a healthy 21 days of cover but in reality they are operating with a much lower level of saleable stock. The rest sits in their books and in your stock cover numbers but it contributes nothing, zero to sales. In fact, it negatively affects sales as stock that is in demand and selling out is available at too low levels to meet customer requirements.
"They have so much stock but my Customer Service level is rubbish". THIS IS NOT A SUPPLY CHAIN PROBLEM ALONE!
Image courtesy of Stuart Miles at freedigitalphotos.net