Over the next 2-3 weeks, the test time for FMCG-Cos will be in the midst of supply chain disruption challenges: study

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Image for illustration.

Image for illustration.

The next two to three weeks would be a test bed for how supply chains can keep up with this temporary increase in consumption, KPMG said in its report entitled “Potential Impacts of COVID-19 on the Indian Economy”.

  • PTI
  • Last update: April 6, 2020, 11:20 PM

FMCG company sales increased due to increased demand from panicked consumers who had overcrowded important products and goods in the face of the corona virus threat. However, this could be offset by a fall in inventory levels due to the potential supply chain disruption, financial advisory firm KPMG said in a report.

The next two to three weeks would be a test bed for how supply chains can keep up with this temporary increase in consumption, KPMG said in its report entitled “Potential Impacts of COVID-19 on the Indian Economy”.

In addition, the e-commerce sector will also face challenges due to COVID-19 and may experience a slowdown in growth, he added.

“We are in the middle of a global pandemic. Given the social distancing guidelines to address the COVID 19 threat, it is logical to expect consumers to overlay key products and goods. The existing uncertainty about how the pandemic is going Developed can lead to an increase in consumer spending in categories such as rice, flour and lentils.

“This could easily boost the sales of FMCG companies, but at the same time it can be neutralized by a decrease in inventories due to possible disruptions in the supply chain”

The report noted that “in the future we can expect companies to explore newer sales channels that focus on a direct path to the consumer.”

It has asked the government to relax the manufacturing regulations for important goods with faster processing and adequate insurance protection against extreme business disruptions.

In the area of ​​e-commerce, KPMG said that the supply chain would come under more pressure.

“Another challenge for e-commerce companies is that they need to equip their employees with the appropriate resources to remotely manage operations with little or no disruption.”

The Indian retail sector was valued at $ 950 billion in fiscal year 2018-19 and was the fifth largest retail sector in the world.

Household and personal care contributed 50 percent, while the healthcare segment was 31 percent and the rest 19 percent in the food and beverage segment.

According to the report, raw material supply could be challenging due to disrupted supply chains. In addition, a decline in imports could have a significant impact

Select categories for retail and durable goods.

In addition, production for certain categories, especially non-essential ones, would be a major challenge as “demand is unlikely to pick up immediately”.

“Cash rotation would slow for all categories, although food and groceries would be less affected. Large retail and real estate companies can be expected to renegotiate rental contracts based on the force majeure clause. It is still unclear whether and how banks will act to support companies in such a situation, “he added.

The retail sector contributed 10 percent of GDP and 8 percent of employment in fiscal year 2018-19, the report said.

India is currently going through an unprecedented three-week complete block that ends on April 14 to prevent the spread of the coronavirus.

According to the latest report from the Union Department of Health, the total number of COVID-19 cases has increased to 4,683 and the death toll is now 138.

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