Supply Chain Blog

7 Deadly Sins: Why FMCG Distributors are Overstocked in CEE

Posted by Dave Jordan on Wed, Jun 13, 2018

How I guffaw when I hear producers complain about traditional trade distributor overstock.Make no mistake Mr. Producer, YOU put the stock there, oh yes you did! Distributors don't buy stock for something to do or a laugh and a giggle. Excess stock blocks up their warehouses and locks up their cash.

Why does this happen in even the largest companies?

1. Month, quarter and year-end push. "Targets have to be met so push as much stock as possible into the Distributors." This is simply loading and is not real sales.

2. Failed launches. Unrealistic Producer sales objectives leading to slow moving goods which sit in warehouses.

3. Old label stock. Perfectly good stock but the pack with the new artwork is being sold already and nobody wants this "old stuff".

4. Old and expired promotions. Funding support has ended so what do we do with all these left over promo packs? Don't expect sales and marketing colleagues to help.

5. Returns from customers. Still arguing about who is to pay for these returns? You should have had clear SLAs and contract in place.

6. Producer forecasting errors. Nobody wants to lose face at Producer HQ so the stock sits and gathers dust until it expires or is stolen.

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, ie what consumers actually want to buy.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 or not at all to meet customer requirements.

"Those distributors have so much stock but my Customer Service level is rubbish".  IT IS NOT A SUPPLY CHAIN PROBLEM!

 

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