The disruption impacting the food and beverage supply chain continues — labor challenges, rising import costs, material and product shortages, shipping bottlenecks — and companies across the value chain are being affected in critical ways.
The issues are complex and evolving, with no quick fix or one-size-fits-all solution. Food and beverage companies must apply creativity and innovation, leverage technology, and embrace communication and collaboration.
Communicate often — with all parties at the table
In the face of ongoing disruption, prudent decision-making and resilience are key. Leading from a place of fear drives unproductive behaviors. Consumers aren’t eating more, but where and how they buy has changed, which has created false demand in the market.
Planning ahead and opening lines of communication are a must. Food processors, vendors, third-party logistics providers (3PLs), the customer — they all need to work together to minimize pressure and surprises. While you may be communicating and problem solving with your customers, often the 3PL isn’t part of the discussion — a missed opportunity.
Invest time upfront in the relationship to ensure your 3PL understands who your top-priority customers are along with the needs of your individual customers, down to required documentation, alternative SKUs to fulfill orders, specific delivery details — give your 3PL the information. In other words, don’t assume the 3PL understands your business. This isn’t always easy with so many parties in the supply chain, but it’s necessary.
Leverage costing and margin intel for insight into your operations
In many food and beverage businesses, it’s the owner keeping a pulse on operations rather than perpetual inventory systems, processes, and procedures. Often, periods of disruption reveal that companies don’t have as much visibility into operations as they would like. External issues throughout the value chain only magnify the lack of insight and put the company at the mercy of its supply chain.
Understanding the profitability of individual SKUs helps businesses rationalize which products to produce with limited resources — be they time, labor, production capacity, or raw materials. Pushing beyond resource constraints can backfire. Instead, focusing on your most efficient and profitable SKUs can help manage both material and labor issues.
Take a step back to understand the actual costs and margins on the products you sell to help make decisions.
Continue to evaluate the ROI on tech investments, processes, and procedures
Increased use of technology and automation can help food and beverage companies better respond to product and labor shortages, gain efficiencies, and improve communication and transparency among suppliers, distributors, 3PLs, and customers.
Technology today can enable customers to tap into manufacturer and supplier ERP systems to monitor items down to the SKU level as orders make their way along the supply chain. This eliminates surprises upon opening truck doors at your dock. Data can be shared with your customers so they too know exactly what items will arrive and when. Continue to evaluate the return on investment of technology investments — in the current environment, you may be willing to accept a longer payback to help ease the challenges.
Understand your suppliers’ capabilities and collaborate
Technology enables transparency, but smaller, owner-managed companies can be challenged to make large tech investments. Strategic partnerships and collaboration with critical vendors can alleviate some of the need for increased investment in technology and inventory. Many suppliers have a robust data infrastructure that can offer greater transparency into your raw materials and products. Talk to your suppliers about their capabilities and how you can leverage them.
Focus on small innovations and quick wins
Resilience in the face of the present supply chain and labor challenges takes ongoing creativity and innovation. These “quick wins” can help overcome challenges and maximize resources:
- Consider automating areas of the business that are particularly challenging to find labor, such as cold storage picking.
- Optimize order quantities and deliveries of nonperishable items to help both your workforce and your vendors work more efficiently — for example, order a full container load every two months vs. a half container load every month.
- Evaluate the pros and cons of maintaining additional safety stock of critical materials to avoid empty shelves. While it can be a game changer in times of shortages, it consumes working capital and can raise debt and add costly storage and warehousing commitments.
- Be cautious of pushing your workforce too hard. It’s not sustainable, and you’ll see the negative impact in turnover. Understand the needs of staff and think of ways to help them be more productive even without automation. Be creative in how you recruit — consider different solutions for each market as well as flexible scheduling and attractive benefits.
With the challenges facing food and beverage businesses, it’s easy for owners and managers to be consumed with fighting daily fires. Embracing technology, communication, and collaboration across the value chain can help you lead your business through the challenges and emerge more resilient.
As always, if you have any questions, feel free to give us a call.
