Food and beverage supply chains have always been complex, demanding tight management to avoid waste, loss, spoilage and damage. However, according to McKinsey, these supply chains are less susceptible to disruption than those in other industries because they are more regional and rely less on trade. The food and beverage industry is more vulnerable to issues of climate than trade.
Yet, in 2020, the COVID-19 pandemic was a significant enough disruption to put immediate strain on food and beverage manufacturers’ abilities to maintain stable supply chains. Their shortcomings were on clear display:
- They didn’t have full visibility from end to end.
- They didn’t have supplier alternatives or appropriate contingency plans should a supplier close a facility.
- They relied too heavily on outdated processes that inhibited their ability to act.
- Their staffing capacity was compromised, affecting production.
- There was a dramatic spike in demand for trucking that drove up prices across industries.
As producers were coming to terms with these issues, demand for their essential products remained.
Most food and beverage manufacturers were aware of these shortcomings. Product recalls are common in the industry and often expose limited visibility, challenging manufacturers to consider more advanced solutions as regulations tighten around response time. And shipping issues, such as delays or complete stops, expose both limited visibility and a lack of contingency planning.
Regardless of the industry’s low exposure to supply chain risk, McKinsey still estimates that, over the course of a decade, supply chain disruption at a food and beverage company can lead to losses equal to 30 percent of a year’s profits.
This truth, coupled with the major disruption seen through the COVID-19 pandemic, should motivate manufacturers to pursue greater resilience in their supply chains. It won’t only buffer your business in the event of a disaster or a climate issue; it will create efficiencies with substantial financial returns and help you compete and grow.
A strong supply chain that accommodates the needs of the food and beverage industry has the following essentials:
- A real-time view from end to end
- The ability to adjust on the fly – wisely
- A constant eye toward cost optimization
- The right tools for optimal employee productivity
A real-time view from end to end
Having visibility over the supply chain is essential to both identifying when issues arose and detecting them in real-time to reduce their impact. Unfortunately, when disruption from the pandemic hit supply chains, many food and beverage manufacturers had manual, outdated and disparate processes for tracking their supply and products. They had solutions like automation, Internet of Things (IoT) and Artificial Intelligence (AI) on the backburner. And their systems weren’t completely integrated.
Thus, they didn’t have a complete, immediate view of activities along their supply chains and in their operations to help them measure impacts, make forecasts and adjust planning, staffing and logistics.
Real-time visibility of every aspect of the supply chain, including inventory and production in your factories, help you make optimal decisions amid any type of disruption. With it, you can quickly identify an issue and determine how it will impact the supply chain, then make the most efficient adjustments. And having your systems integrated and visible in one place makes it easy to measure the impact and make changes across functions.
For instance, if you can see that an essential ingredient will not be delivered, you can quickly source from an alternative supplier in your network or optimize production that includes that ingredient.
The ability to adjust on the fly – wisely
An agile supply chain is essential for food and beverage manufacturers with or without major disruption. Catching issues with supply and logistics as they occur helps them avoid costly adjustments to freight and routes and reduce food waste from spoiled product or from short supply of an essential ingredient.
The critical step to gaining this ability to pivot in real time is integrating your systems and processes from planning to delivery. With your data and technology integrated, you can more readily see across operations and make the most effective adjustments. You can enhance your efforts with technologies that connect your factories, giving you more touch points for data and visibility and also delivering forecasts and predictions to keep your operations efficient and on schedule. These technologies include IoT and AI. These solutions lend themselves to real-time production and resource planning that will help you manage and optimize this important element of the supply chain.
Another critical step is to address your supplier network, taking measures to ensure you’re secure should a supplier fail or have a delay. You must develop alternative supplier options and use an expedient supplier qualification process for vetting and onboarding these alternatives.
Such measures can help protect your production should a climate issue impact your supply chain. Should a primary ingredient be compromised, you’ll have redundancy in your supplier network to stay on-schedule.
A constant eye toward cost optimization
Visibility and agility in supply chain management directly lend themselves to cost efficiency. With these capabilities and the immediate oversight they offer into your processes, you can take swift actions that connect to cost savings and optimal spend at any one time. You can avoid costly outcomes like a losing an entire shipment to spoilage, paying to expedite a shipment before it goes out of date, or wasting ingredients on-hand because one raw ingredient is unavailable to complete an order.
Real-time visibility over your production line means you can keep production moving more efficiently and reduce downtime. With IoT technology, you can gain a view into how your equipment is performing and improve Overall Equipment Effectiveness (OEE). Thus, you won’t waste time and spend because of poorly performing equipment or equipment failure.
Having everything integrated and connected, seeing your operations in one place, also means you can optimize and better match inventory levels and production to other relevant components like customer demand, your capacity, issues with supply, etc.
The right tools for optimal employee productivity
In a strong supply chain, employees’ time is as optimized and productive as any other component. Your employees are critical, from production staff to staff in supply chain planning and management. You want to be able to allocate your resources effectively in the event of disruption, shifting duties or reducing capacity, as many companies did to accommodate social distancing. Your employees should also have the tools and real-time data they need to make better decisions and be agile in their responses.
The path toward supply chain resilience
Here’s where you can get started improving your supply chain operations:
- Assess your risks, including with suppliers, distribution networks, your production processes and more.
- Implement technologies and solutions that help you capture and monitor real-time data.
- Develop a business continuity plan that will guide you through various types of disruption.
- Identify solutions and strategies that will help you build these essentials into your supply chain.
Fortifying your supply chain can lead to increased productivity, decreased lead times, improved OEE and reduced raw materials, finished goods and work in progress inventory. All of these benefits are useful regardless of whether disruption is occurring. It’s about being ready for future shocks, small or large, which, as we learned in 2020, can come when we least expect them.