Your food and beverage business is growing – congratulations!
Take the time to celebrate your success and seeing your hard work take off.
But if you’re like most growing food and beverage businesses, you don’t have time to celebrate. Because your growth is creating problems.
The processes you developed as a small company are no longer working. As a small company, ad hoc processes were fine. With fewer things going on and fewer people to manage, it was easy to make sure everything got done.
As a bigger company, things have changed. Actions are falling between departments, with everyone thinking someone else has done something. You only discover they haven’t when it’s too late. The result is more stress and more hassle. There’s also an impact on profitability. Forbes says that companies are losing up to 30% in revenues due to inefficiencies [article here]
The key to stopping the rot is to standardise processes. Standardised processes will strengthen your business and put you in the best possible shape as you look to the next stage of growth.
Here are some of the things you need to think about.
Start with the bigger picture of the processes in your food and beverage business
Before you delve into the detail of your processes, it’s vital to step back and look at the bigger picture. It sounds obvious but it’s easy to forget when you’re looking at the nitty gritty of something. Each individual process in your food and beverage business is part of a chain. No element is standalone, so a decision you make in one area will have an impact on another link further down the chain. You need to keep this in mind – you don’t want to standardise processes and optimise one element only to create bigger problems further down the line.
For me, at the most basic level, you can divide the processes of every food and beverage business into three areas:
- purchasing and planning
- inventory management
- processing and goods out.
At each stage, it’s important to get the input of everyone involved in each process, no matter where they sit in your hierarchy. It’s the people at the coal face who will be able to tell you what’s really going on and what the issues are.
Start with purchasing and planning
Everything in the supply chain of your food and beverage business starts with purchasing and planning. The first step is to analyse how you work at the moment. Document every step and add notes. What causes slowdowns? Where do you have problems with efficiency?
For example, your investigation might reveal you have problems ordering the right amount of stock. You might also uncover that prices from suppliers change from order to order, which means your unit costs fluctuate from batch to batch. For advice on this, you might find How to choose the right food and beverage purchasing method useful.
Then turn to inventory management
Once you’ve documented purchasing and planning, it’s time to turn your attention to inventory management.
What processes do you follow when you receive stock? How do you store stock? How do you manage your inventory and rotate your stock? How do you create your pick notes when you’re compiling a customer shipment? Again, your goal is to document each step and identify the gaps where you are losing time and money or making mistakes. For more on this, read 9 techniques to reduce warehouse picking errors.
One of the most common problems I come across when working with food and beverage businesses is stock rotation. Very often, a business will have several products with different expiry dates because they’re continually receiving and shipping those products. It’s obvious that you need to send out the batch with the closest expiry date first so you don’t have stock expiring on your shelves. But very often, the reality is that life is so fast-paced, new batches with the longest expiry dates are put at the front of the shelf because it’s quicker that way. They’re also the first to be sent out because they’re at the front of the shelf. And so the problem continues.
Finally, look at processing and goods out
The final step is to look at your processing and goods out systems.
How do you receive orders? What is the process for registering orders on your system? How do you communicate with operations to let them know which orders are going out? How do you invoice customers? What credit control safeguards are in place?
Here, as everywhere, you need to make sure that the theory always matches reality. For example, do you always follow the same process for receiving goods no matter how they arrive with you? Or do people cut corners to save time but ultimately put standards at risk?
A non-standard process isn’t always a bad process – but it’s important to know the difference
When you start to document your processes and describe the precise steps you take to complete a task you start to see where you are doing things differently to the industry norms and where efficiencies can be made.
However, it is important to remember that different doesn’t always mean wrong. Something you do differently to everyone else could be giving you a competitive advantage, so changing it would be a mistake. However, you won’t know this until you’ve benchmarked against your peers.
Having said that, I would also add that in my experience, it is unlikely that a different process is delivering an advantage. For 80% of small or medium sized food and beverage businesses, doing something differently is resulting in unnecessary inefficiency.
To understand whether you have a competitive advantage you first have to do the work in understanding how you’re working at the moment. If you would like to engage expert support as you look to document and standardise processes, please get in touch and let’s have a conversation. I have over 20 years’ experience in helping food and beverage businesses scale up by implementing supply chain efficiencies. It means I can see at a glance a process that’s delivering a competitive advantage and one that isn’t.