Supply chain challenges: all the obstacles to overcome if you want to deliver value to your customers. From sourcing materials, transforming, packing and shipping the purchased products making sure to deliver the right item at the right time, to the right place at the right costs.
Seems quite complex right? Well for Food & Bev companies it’s certainly is:
Here are the 5 main Supply Chain challenges and how to get through them
One of the most urgent supply chain challenges for any F&B business is to ensure traceability across the entire SC. While it’s relatively easy to trace food that is sold or distributed as it is, think of wholesalers of finished products, this can be a real pain for manufacturers. Tracing the batch and ensuring consistency of Lot numbering across ingredients, throughout the manufacturing process up until the finished goods, is a job that can take days if you don’t have the right tools.
To lose traceability of your goods on manufacturing phase could mean that, in case of suspected contamination, the regulator might force you to recall and put in quarantine all the inventory of an item or items if these share some ingredients. If you trade with big retailers, and fail to provide a traceability report within a few hours from the initial request, this can trigger a product recall followed by a fine that might easily bankrupt a small Food & Bev company. Read more about the true costs of a product recall here [Link]
Tools to use to ensure traceability of Food & Bev products:
- Ask your vendors to include the product batch in the paperwork when delivering supplies, no exceptions.
- When doing the Inventory checks, note the product and batch - expiry date. If you have discrepancies on batches, it means you are losing traceability
- Invest in a proper Supply Chain/ warehouse management system, even better if integrated with an accounting software: These products are called ERP.
2. COLD CHAIN
Temperature-controlled storage and transportation is also a critical element of the supply chain for Food & Bev, having a shipment of chilled or frozen food exposed to heat for too long means spoilage and risk of food poisoning for your customers. Unfortunately, if you are a small business, you might not have the resources to ensure constant temperature. But that is not a a critical issue. Chilled and frozen food can safely be exposed to high temperature for a short time. Usually, if for less than 2 hours, most foods are fine.
Make sure to check your fridges and freezers regularly, constantly monitor that they are functioning well. When you receive and ship goods make sure to:
- On receipt, check the temperature of the truck twice. One measure for each end of the trailer. You can use a laser thermometer; they sell for less that £100.00. The area near the doors of the truck can be warmer that the desired temp, but the end of the trailer must be cold. If not, it’s your right to reject the good!
- Prepare your orders in the fridge, make sure the staff wears protective clothing but ask them to work in the refrigerator when picking the good
- If space is an issue, split the order in chilled and ambient, pick separately and consolidate before loading. This will reduce the time chilled goods are exposed to ambient temperature
- Ask your logistics partners to provide temperature logs. Most F&B logistics companies have their trucks equipped with a device that can print a receipt with the temperature taken every hour since loading time. Others allow their customers access to temperature log online. Check often, if a truck carrying your chilled goods has travelled for more than 2 hours with the load at more than 8C you should not accept the goods!
3. SHELF LIFE
Most small business can plan months in advance, bulk-buy inventory and wait for weeks before it’s received. Unfortunately, mother nature does not care about your planning. Shelf life of ingredients and finished products dictates, stock must be received fast, and so it must go, else it might go wasted. This make the logistics of food one of the many supply chain challenges for food & Bev companies
This means F&B companies need speed. Any delay in the collection, shipping and receiving of the goods has a negative effect on the remaining shelf life of the products. To minimize the risk of delays you can:
- Agree lead time with your logistics partners and ask to include it in the contract agreements
- Choose road or rail logistics over sea freight where possible...
- Plan replenishment in weeks, not months
- Avoid bulk buying supplies. Although it is tempting because savings can be made, the cost of wastage usually is higher than the savings
How delicate can a delicacy be? (Sorry, I couldn't resist...) Wastage due to handling is, after spoilage due to excessive buying, the main cause of inventory wastage for a F&B company.
Whether it is due to equipment malfunctioning of manual handling, Food & Bev products are often carried in fragile packaging. Glass, and plastic jars can easily break if dropped or shaken, bags can be ripped or pierced causing contamination, spillage and the loss of protected atmosphere. Because of this, handling can be one of the main supply chain challenges to overcome.
- There are no shortcuts here. Give your staff proper food handling training, there are companies who can deliver training on-site. It can actually be fun and it’s a good investment
Because all of the above, ensuring traceability, temperature controlled, speed and safe handling, Food & Bev Supply Chain is expensive. Shipping and storage require care, expertise and resources therefore it’s costly. For SMEs in fact, these costs can eat a big part of the gross margin, as much as 20% for certain food categories.
- It is of absolute importance to budget these costs and to constantly measure them against revenues and purchasing price. The risk is having costs to outweigh the mark-up, resulting is selling at a loss and realising it before it’s too late. Read: when it’s time to pay the bills and there is no cash left!
Complexity is the enemy of execution. A complex operating model means more Supply Chain challenges to overcome; therefore high risks of failure on the execution of any business strategy. Yet, for most Food & Bev companies, SC is complex and challenging, to ignore it would mean to be in a state of naivety and denial. Here positive thinking does not help.
But planning, break-down of complex delivery, constant monitoring and hard work does. If you need help with Supply Chin challenges in your food and bev business let's jump on a call. Over the last 20 years I have hepled many businesses, let's see if I can help yours