Food and Beverage Industry
Industry Trends and Challenges
There are three major trends affecting supply and demand in the food & beverage industry. Global rises in demand are caused by worldwide population increases of approximately 100 million people a year.
Greater prosperity around the globe also drives demand for higher value food products. However, the supply to meet this demand is slowing, with increases in production rates per acre slowing.
The NEW Demand-Driven Operations
The result is global growth opportunities, rising input costs and greater pressure to lower the costs in the food and beverage supply chain at a time when it is becoming ever more complex.
Tompkins, a supply chain execution firm, is working with food and beverage industry leaders to develop and fine tune their supply chain strategy to address many of the leading challenges, including:
The Asia Opportunity: Do you know how to leverage the huge Asia opportunity? China and Asia present unique supply chain challenges as the region shifts from being the world’s factory floor to a booming global marketplace. Learn more about Asia supply chain excellence.
Channel Diversity: There are a growing number of store types catering to specific consumer needs, such as supercenters, membership clubs, and convenience stores, and the growing popularity of foodservice and specialty stores, as well as the expansion of private label products. This diversity of channel outlets means delivery methods need to be reviewed and optimized on a regular basis.
Packaging: Packaging is being used as a competitive edge and an area to reduce costs, including new portion packs, use of “smart” label technologies, and customers demanding less material waste and environmentally sustainable packaging. To complicate growing international demand, each country has its own regulations on packaging.
Transportation: Transportation decision makers face many challenges, such as customer requirements, regulatory requirements, carrier availability, shipment visibility, and much more. Fortunately, transportation planners can apply best practices and technology to develop a well-controlled freight management program. Some common transportation improvement strategies include developing core carrier programs, employing a Transportation Management System, gaining control over inbound freight, and outsourcing selected functions. Learn more about these and other transportation solutions from Tompkins.
Variety and Convenience: Consumers are looking for more food options that meet a variety of needs, including health, taste and convenience. A number of consumers are trying to eat more at home, but they still look for easier ways to consume and prepare meals. Single serving sizes and extreme portability, microwavable packages and “one-handed eating and drinking” are in demand.
Regulations: There is a move to “globalize” the mission of the Food and Drug Administration, because its task now is not domestic, but international. The European Union’s exporters and importers face many new regulations for special security certificates aimed at reducing terrorism, fraud and counterfeit products. A strong warehouse management system (WMS) helps support traceability and recall functions, as well as overall operations.
Since food and beverage products are ingested, there is a particularly strong interest here in global trade and risk issues. Protecting a product brand, complying with global regulatory trade requirements, and maintaining a high degree of accountability are important features of effective, low-risk food and beverage supply chains.
Sourcing: Public policy and consumer sentiment is driving product traceability and increased demand for private label, organic foods and product freshness. These items alone put significant pressure on sourcing professionals to achieve both low costs and higher quality of their raw materials, perishable, frozen and dry goods. Visibility across from field/manufacturer to the consumer, adaptable procurement processes, and integrated sourcing strategies can help ensure best cost, best quality and product traceability that exceeds the rising consumer demand.
Revenue Growth: Tompkins brings momentum to your strategic planning process for the food and beverage industry with years of marketing and growth development strategies. Food and beverage consultants have developed, launched and managed numerous programs to assist clients to grow revenues and increase customer satisfaction for increased market penetration in target retail channels. Benchmarking assignments have positioned clients on a cost basis against competition to identify areas of improvement.
Economic Impacts: The current economic conditions can impact consumer buying habits and have a wide and unpredictable effect on the food industry’s input costs. Branded food companies actually enjoy a sweet spot during an economic downturn — after people stop going out to eat, they first turn to branded foods before switching to private label products.
But once consumers switch, it is very hard to get them back without sustained price drops. In addition, when predictability of commodity costs is low, or the price swings widely, the traditional multi-month moving average used by food companies fails to provide the predictability needed for financial planning, and varying the price to consumers may be difficult or not a viable option.
Inventory management factors highly into financial planning. The forecasting solution needs to allow for compatibility with the market intelligence tools.
Get a quick look at the powerful impact demand-driven supply chains can bring to your customer satisfaction and operational value in this short video from Jim Tompkins, CEO of Tompkins International, and Greg Brady, CEO of One Network.