Running a successful food and beverage business has many inherent risks and challenges. Worker relations, a global supply chain, and more make it hard to succeed, and these challenges evolve every year.
However, while there are many different pressures facing the food and beverage industry day in and day out, these four are omnipresent and perpetual, affecting the entire supply chain from source to supermarket, with manufacturers and distributors most heavily impacted.
Managing Price Fluctuations
Like any industry, the price of raw materials is in a constant state of flux. In the same way that you find “market price” on restaurant menus, those higher up in the supply chain need to deal with this on a constant basis—but also need to do so at a much larger scale. A few cents may not seem like a lot, but spread this out a massive order and margins quickly take a hit.
Whether it was the massive spike in the price of eggs in 2015—a time in which a dozen eggs reached $2.39 farm price received, the 2014 hops shortage that caused panic buying, three-year delays, and a pursuant hops surplus, or naturally volatile ingredients like Madagascar vanilla, those in the food and beverage business could see their business change overnight.
“Managing margins by passing wholesale cost increases on to one’s customers will never set a company apart from the competition,” says Gary Raines, an economist with INTL FCStone Inc. Often this leaves producers with three responses including changing ingredients, operating on a thinner margin or moving the pain down the line—none of which appeal to producers.
To address this, those in the food and beverage industry need visibility through their complete supply chain, knowing the right time to buy to minimize costs for themselves and ultimately their customers.
Changing Customer Demand
Remember the kale phase? The bacon boom? The time when everyone including non-Celiac sufferers needed gluten-free options? Customer demand can change at the drop of a hat, and if you aren’t prepared for the fickleness of the market, you could end up with a warehouse full of product with rapidly approaching expiration date.
Understanding and preparing for down-market changes is both a challenge and an opportunity. For those who can balance demand and plan for fluctuations, you can avoid the damage to your reputation if and when demand increases or decreases suddenly.
Minimizing Food Waste
When it comes to food and beverage, (nearly) every ingredient has an expiration date. Whether it’s a product that you need to turn within days like lettuce, fresh fish, or bread, or something that you can keep on hand for weeks or months like rice, flour, or honey, it’s necessary that you understand what you have, when it expires, and how to reorder it if you hope to succeed.
Paired with proper demand planning, powerful inventory management can help you control food waste and minimize loss—shipping or producing the right items at the right time.
Traceability and Recall Readiness
If one person gets sick from a product, it’s likely an anomaly. If dozens, hundreds, or thousands do, it’s a recall. Recalls may harm your reputation, but are better than seeing your business fined or shut down for failing to do so. A recall is an all-hands-on-deck initiative that could come from either end of the supply chain, and no matter where you are in it, you need to move fast.
Whether it’s a contaminated raw material supply, a piece of metal that broke off and got into a product during the manufacturing process, or a dozen sick consumers, everyone in the chain needs to act fast. Communication is key, but even more important is the concept of traceability. You need to know exactly which item in which batch is at fault, know who received it, and pass the information through the supply chain.
This requires a highly-integrated and intelligent solution that not only provides the traceability you need, but the ability to communicate, conduct mock recalls, and ultimately prepare for the real thing if it happens.
The Right Solution for Your Food and Beverage Business: Get to Know NetSuite
At MIBAR, we understand the challenges and needs of companies in the food and beverage industry and have helped companies with unique challenges to improve their processes and technologies in order to thrive locally and globally.
Whether our clients source their materials from down the street or on the other side of the world, they trust and recommend us to implement and support the ERP, CRM, and Business Intelligence solutions they need to see their supply chains more clearly, forecast and adapt to changes in demand, and satisfy customers.
One of these solutions we offer and have successfully implemented for a variety of our customers is NetSuite. Designed for the needs of the product-based business, NetSuite is used by thousands of food and beverage companies worldwide to address the challenges and grow their business.
Learn more in Signs Legacy ERP is Holding Your Food and Beverage Business Back.
At MIBAR, we are proud to have helped companies like Peanut Butter and Co. and more to use NetSuite to get the job done faster, more accurately and with less risk than ever before. View the full case study here. We welcome you to learn more about our products, our process, and our highly satisfied customers. Ready to learn more? Contact us to schedule a free consultation with the experts.