Covid lockdown: From farm to fork, supply chains adapting to ‘new normal’

Forum Gandhi Mumbai | Updated on June 08, 2020

Large gap was seen between market demand and what manufacturers can supply

As soon as the coronavirus lockdown was announced, people rushed to the nearest grocery stores for pantry preparation. Some overstocked while some came back empty-handed. The unprecedented consumer demand impacted the supply chain forcing each link of the chain to go the extra mile. This changed the journey of products from farm to fork, perhaps, adapting to the new normal.

Obviously, there has been an incredible shift in the demand and supply trends before and after the lockdown, said Aditya Vazirani, CEO, of Robinsons Global Logistics Solutions. He explained that the initial uncertainty and fear of extended lockdown had led to people hoarding supplies, “which in turn led to a shortage, despite no change in the actual consumption patterns of people,” claimed Vazirani.

This increased the demand curve which has had a forlorn effect on the manufacturer and farmers. “This is more commonly known as the bull-whip effect,” Vazirani said.

A Nielsen report launched in the last week of March stated that between mid-February to mid-March of this year quantified the exact buyer behavior which Vaziran explained about earlier. The purchase of packaged atta saw a spike of 16 per cent, spices saw a growth of 21 per cent whereas cooking oil purchases saw a whopping growth of 106 per cent.

Consumers behaviour

Nielsen called this buying behaviour as, “pantry preparation and quarantined living which included heavy buying of staple food categories namely, Packaged Wheat flour (Aata) and packaged Pulses. Likewise, we saw significant growth in indulgence foods categories as well,” Nielsen had said.

This led to multiple things happening simultaneously. Firstly, the shelves were empty for the next consumer. “Secondly, due to the unavailability of stock and excessive demand, the retailers start panicking, and thus puts a bulk order with the FMCG manufacturers. This, in turn, creates a load on the farmers, too, Vazirani explained.

As Vazirani explained, this overindulgence in buying led to an unprecedented demand for FMCG players too. Hemant Malik, Divisional Chief Executive, Foods Division, ITC Ltd, said that with people remaining confined to their homes during this pandemic, “there has been a surge in demand for staples like atta, salt, and spices.”

Just like atta saw a surge in sales, other essential items such as milk and other dairy products are widely consumed in India both commercially and domestically The sales for these products too saw a surge.

Without quantifying the demand, Devendra Shah, Chairman of Parag Milk Foods Ltd said that his company too had seen a surge in milk procurement at all their plants “as smaller milk players were unable to operate in this environment,” he said. Parag Milk Foods sells brands like Gowardhan milk, Go cheese and Pride of Cows among others.

Over 14 per cent of those who had been surveyed by Nielsen said that in March, they were unable to procure milk and other dairy products.

This mismatch, according to Devendra Chawla, MD and CEO Spencer’s & nature’s basket, led to a massive dip in the fill rate of manufacturers across the country. “They were concentrating in the production of top-selling lines only and range production took a back seat.”

Among those surveyed, 8 of 10 retailers had supply and out of stock challenges, the report stated and over 65 per cent of grocers were sourcing from wholesalers at higher rates due to lack of availability.

“Supplier fill rate dropped from 80 per cent to mid-20 per cent. At the onset of the pandemic, we have seen a large gap between market demand and what manufacturers can fulfill. “Range of components are still missing in manufacturing scheduling,” Chawla said.

Vazirani explained that this mismatch disrupted the retailer's usual buying pattern because “he wants to keep all his customers happy, and thus, he orders double or three times the amount from the distributor. The distributor has received 2x an order from several shops, who then further places an order with the manufacturer for that increased order.”

This consumer behavior coupled with disrupted supply chains and lack of manpower forced each link in the supply chain including FMCG companies, logistics partners, and retailers of these essential items to change their functioning.

Working model

Where ITC Foods that sells Ashirwad Atta ramped up its production across food factories, Parag Milk Foods altered its production plans. It procured maximum milk from the area itself in order to boost the sales for the farmer in that vicinity.

RGL along with other logistics companies have faced the same issues as others in the supply chain, RGL had to bifurcate teams, for manpower efficiency. RCL also had to ask its employees to resume albeit on alternate days but deliver more value to the customer.

At Parag Milks, the roles of the staff at the dairy company were also reshuffled as well. “The employees who lived nearby were attending the delivery schedules, manufacturing units, and backend staff supported from their respective places,” Shah added. The company in return took care of the food, stay, travel, and safety of the employees at an added cost.

All the players BusinessLine spoke to rewrote their safety standards and added their SOPs added temperature checks and PPEs kits, too. “We are working with our IoT partner in setting alarms through our CCTVs in the warehouse if a distance limit has been breached,” Vazirani said.

According to industry players and experts, the added costs of technology and safety measures will end up creating a bigger hole in the consumer’s pocket. This will cause a ripple effect in a lesser affinity towards brands and reduced discretionary spending.

While the timeline to post-Covid is still blurred, experts also believe it will also take a while before spends come back to the pre-Covid era

Meanwhile, all these players said that they were experimenting and learning as their ultimate goal was to reach the end customer.

To reach the end consumer, ITC is forging innovative partnerships with various e-commerce platforms as well as new-age home delivery ventures having the capability to serve the last-mile.

Parag Milks and ITC have pro-actively reached out to societies and made its vans available for home deliveries. This model has been worked out with the help of our distributors and retailers.

ITC also connected with consumers through its own direct to consumer portal as well as the ITC store on wheels which catered to housing complexes across major metros." malik

RGL is considering factors like consolidation of cargo, automation of processes, implementing greener alternatives, and training of employees to manage these new operations etc., are some of the factors we will be actively working on, as part of our new learnings in the post-COVID-19 era.

To suit the customer’s fancy, Chawla said, Spencer’s & nature’s basket will come up with different immunity booster solutions, personal protective equipment, and healthy alternate food categories. “We will also provide a tech-based fashion shopping tour for the consumers to enable them to buy with minimum touches,” he added.

Published on June 08, 2020

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