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Third-party supply chain firms see soaring demand amid coronavirus lockdown

Not only are FMCG companies reaching out to these third-party companies to distribute their products, retailers are also ordering from them in large numbers

twitter-logoAjita Shashidhar | April 2, 2020 | Updated 22:45 IST
Third-party supply chain firms see soaring demand amid coronavirus lockdown
FMCG facing the lockdown heat

  • Business of third party supply chain companies has gone up by 2-3 times ever since COVID-19 lockdown
  • Not only are FMCG companies reaching out to third-party companies to distribute their products, retailers are also ordering directly from them in large numbers
  • To their advantage, most of these companies have manpower on their payrolls as opposed to the traditional distributors who mostly hire daily wage labourers
  • Digital backbone of these third-party supply chain companies has become their strength
  • Their salesforce doesn't go from store to store to collect orders; orders are taken digitally
Coronavirus lockdown has brought the traditional distribution and supply chain network of FMCG companies to a grinding halt. It all began with the trucks carrying essential goods not allowed to ply due to lack of clarity in regulations, which was soon followed by a huge shortage of manpower. As wholesalers and distributors pulled down their shutters, their daily wage employees left for their homes in fear, hunger and starvation, and there was no one to reach the products to the retailers. In fact, many retailers have had to shut their stores in the second week of the lockdown, as their stores fell empty and the distributors had not been able to deliver to them.

While the supply chain confusion continues, the gainers in this situation are the third-party supply chain companies such as ShopX, Udaan, StoreKing and Jumbotail. Not only are FMCG companies reaching out to these third-party companies (ever since the COVID-19 lockdown has begun) to distribute their products, retailers are also ordering from them in large numbers. Amit Sharma, CEO of ShopX, says that there has been a 46 per cent increase in retailer ordering and a 110 per cent in order size in the last two weeks. The ShopX app usage has gone up by 70 per cent. "FMCG companies rely on local wholesalers and distributors who don't have ability to respond to adverse situations. Of course, we are also facing manpower issues and are only taking orders that we can confirm and fulfil, but we have better access to logistics. We are also able to hire more effectively and have better access to safety measures." ShopX distributes in over 500 towns  and has 52 fulfilment centres across the country.  

The advantage most of these companies have is that they have manpower on their pay roles as opposed to the traditional distributors who mostly hire daily wage labourers. Ashish Jhina, Co-Founder and COO, Jumbotail, says his company's business has increased by 2X-3X in the last two weeks. "It has become impossible for the traditional trader to even take orders from retailers. Most of them don't even have curfew passes. Since we have a digital platform, retailers are placing orders even at four in the morning," explains Jhina.

At a time when social distancing has become a way of life, the digital backbone of these third-party supply chain companies has become their strength. "Our salesforce doesn't go from store to store to collect orders. Orders are taken digitally," says Jhina of Jumbotail.

"Our warehousing is digital. The presence of the data layer which connects the supply chain makes us more effective," adds Sharma of ShopX. He claims that through his digital database, he is able to tell manufacturers what the need of the hour is. "Sanitizers and handwashes are not the only things that are in demand. Customers are also looking for long shelf-life milk to fresh milk. There is a heightened demand for tetrapak juices. We are able to proactively share this information with the manufacturers."

Over 60 per cent of Jumbotail's orders in the past few days have been staples such as sugar, rice, pulses and oil. In fact, the company has a private label staples brand. "A grocer typically buys staples loose from the wholesale market. With the wholesale market shutting down, we are the only company, which is making staples available," claims Jhina.

Srini Vudaygiri, CEO, Unibic, says that with the traditional supply chain mechanism coming to a standstill, his company has actively started engaging with third party supply chain companies. "We are looking at every possible way to ensure that our product reaches consumers at the earliest. Not only are these companies better equipped in terms of manpower, their digital ecosystem is especially useful."

C.K. Ranganathan, Chairman of Chennai-based FMCG major, Caavinkare also confirms that his company has started to work with third-party supply chain solution producers during this hour of emergency. "We have also started direct distribution. Our sales team has started delivering directly to retailers," he says.

FMCG majors such as HUL, already have apps that enable retailers and distributors to order products online. So, the question arises whether the new normal post COVID-19 will force FMCG companies to digitise their supply-chain and distribution? Jhina of Jumbotail says that companies will surely need to invest in making their supply chain resilient to shocks

Also Read: Coronavirus Live Updates: PM Modi to release video message at 9am tomorrow

Also Read: PM Modi holds video conference with CMs on coronavirus

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