For FMCG/CPG companies, optimal retail stock levels is about maintaining enough stock at a retailer’s warehouse or at a store level to eliminate out of stocks in stores. For retailers, optimal retail stock levels is about maintaining just enough stock to eliminate overstocking in stores or at their warehouses.

However, optimal stock levels need to be about balancing the two – ensuring that consumers always find the SKUs they want at stores while eliminating overstocking. Due to complex demand patterns, dictated by customer buying behavior, this can be difficult to achieve.

Today we explore how sustainability and stock levels are linked and why it is imperative for FMCG companies to ensure they maintain optimal stocks and sell optimal volumes to retailers. Over the past 5 years, we’ve heard of several companies in the luxury sector disposing of their excess stock (burning them or sending them to landfill) and the adverse impact this has on climate change and the environment.

Many of us have not heard of FMCG companies doing this. However, those of you who are close to or in the FMCG sector know that packaged food is often destroyed once past the expiry date or given to farms as cattle feed.

While companies see this as a waste of money, this has even greater implications on sustainability. Not only does the production process consume energy and resources, but the destruction process is as energy intensive.

With sustainability becoming the epicentre for business strategy in FMCG/CPG companies, focus should not just be on sourcing, water utilisation, energy consumption and minimising waste in the production process. Managing stock and raw material write offs is an integral part of this.

Morrisons, one of the large supermarket chains in the UK, recently made the news when they announced that they were scrapping expiry dates on their range of own brand milk. According to Morrisons, Milk is the third most wasted food and drink product in the UK and 1 litre of milk can account for up to 4.5kg of CO2.

Personal care and cosmetics products have longer shelf life, but are also known to expire and either sent to landfill or destroyed. These are often mixed with coloured dyes to prevent reuse, if sent to landfill. And if you were wondering about the carbon footprint for personal care products and cosmetics, this may give you an indication. An average bottle of shampoo (c.30 hair washes) can account for up to 10kg of CO2. And when expired shampoo units are sent to landfill or burnt for energy, the implications are much worse.

Retailers and FMCG companies should be looking at data driven software that can model consumer buying behaviour to optimise stock levels at retailers, minimising write offs, and the resulting carbon footprint.

Published by Veena Giridhar Gopal

After more than 20 years working in the FMCG/retail sector, Veena is now co-founder & CEO of salesBeat. salesBeat has an AI driven platform that uses micro and macro factors to model consumer buying behaviour and makes predictive recommendations of optimal stock levels to FMCG sales people who sell into supermarkets, distributors & wholesalers, ensuring 100% availability of your brands in store and increasing revenues by up to 30%.

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