Supply Chain Blog

7 Deadly Sins: Why FMCG Distributors are Overstocked in CEE

Posted by Dave Jordan on Fri, Jun 04, 2010

Make no mistake Mr. Producer, YOU put the stock there, oh yes you did! Distributors don't buy stock for a laugh and a giggle. Excess stock blocks up their warehouses and locks up their cash.

  1. Month, quarter and year-end push. "Targets have to be met so push as much stock as possible onto the Distributors."
  2. Failed launches. Unrealistic Producer sales objectives leading to slow moving goods.
  3. Old label stock. Perfectly good stock but the pack with the new artwork is being sold already and nobody wants this.
  4. Old and expired promotions. Funding support has ended so what do we do with all these left over promo packs?
  5. Returns from customers. Still arguing about who is to pay for these returns?
  6. Producer forecasting errors. Nobody wants to lose face at Producer HQ so the stock sits and gathers dust until it expires.
  7. Damaged and expired. Damages happen, get them written off AND destroyed and get over it. You can avoid expired goods - see above!
Overstocked Distributors

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 to sales. In fact, it negatively affects sales as stock that is in demand is available at too low levels to meet customer requirements.

"They have so much stock but my Customer Service level is rubbish". In the next Blog we will take a look at how you can de-stock. Importantly, it is NOT A SUPPLY CHAIN PROBLEM!

Tagss: Dave Jordan, CEE, Traditional Trade, Distribution, Inventory Management & Stock Control