The Friday Report: February 19th, 2021

CPG Relies on Favored Tool During COVID-19 Pandemic:  SKU Rationalization

Consumer tastes have changed. During the COVID pandemic, when much of the population was locked down, snacking became common.  These increasing habits lead to issues in servicing the wide variety of products in a continually widening sprawl of SKUs.  This became a hurdle that was often a bit too high to traverse.

Consumers clamored against empty store shelves.  As business models of major CPG companies are built upon the foundation of supply chain efficiency, having a large number of SKUs results in more complicated supply chains.  This is definitely undesirable during a period of supply chain disruption.

During the pandemic, CPG supply chains made adjustments, at times cutting entire product lines in order to focus on maintaining an adequate supply of core products.  In simplifying the supply chain, operating expenses could be controlled, and goods could be delivered to meet consumer need.  SKU rationalization is also critical to producing efficiencies for retail customers.  When more SKUs are carried, there is a negative impact on response times, inventories, and operational performance.

Mondelez International, one of the largest snack companies in the world, cut 25% of its SKUs.  The idea was to simplify the product lineup on the shelves, reducing complexity, so that key SKUs were positioned to remain in stock.

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Can a “Common Sense” Supply Chain Model Save Bed Bath & Beyond?

At the opening of 2021, big box retailer Bed Bath & Beyond again faced the prospect of more changes and store closures.  COO John Hartmann and other company leaders advocated to investors last year that the retailer needed to make years’ worth of changes much more quickly to save the chain.

The organization’s leaders focused on issues such as:

• Developing a store replenishment model utilizing 30 cross dock facilities to consolidate vendor shipments. The overall number of cross dock facilities would be reduced considerably and be replaced by a network of distribution centers managed by one or more third parties with top notch expertise.
• Leveraging the existing four warehouses to ship e-commerce orders.
• Initiating a transition to “four walls distribution, supported by control tower technology” would be used to provide enhanced end-to-end visibility throughout the supply chain all the way to consumers.

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More Fallout from the COVID-19 Pandemic:  FedEx Adds Peak Surcharges

The higher volume of shipments processed by carriers including FedEx is causing reassessment in the industry.  FedEx announced that it will begin to levy new peak surcharges on Express and domestic residential Ground shipments.  This surcharge, which was slated to take effect on February 15^th until further notice, will affect shippers that experienced a weekly average volume exceeding 30,000 packages between January 3^rd and January 31^st.

Shippers in this category will be charged 30 cents per Express and Ground residential package.  For clarification, SmartPost and One Rate packages in the Ground network are not included in the imposition of the new peak surcharge fee.

https://www.supplychaindive.com/news/fedex-surcharges-february-peak-ground-express/593509/