Retailers, wholesalers and foodservice providers focus keenly on the expectation of their customer: to select the best quality product from a variety of superior quality goods.
That means delivering the freshest products possible. Considering a perishable item's journey through the supply chain, it is particularly important for those in the food industry to order just the amount of each good needed to satisfy demand—no more, no less. A few extra days of inventory sitting around can cost millions of dollars.
Yet, with limited knowledge of upstream inventory and future demand, your best course of action is to increase safety stock to ensure you provide the freshest goods possible to the grocery stores, restaurants, hospitals and schools you serve "just in case."
The food industry faces not only the traditional challenges of handling perishables and dated products, but also additional challenges have been recently introduced that were unimaginable a few years ago:
- Increased globalization;
- Competitive pricing from mass-retailers-turned-grocers;
- Tighter standards for compliance and security;
- Bioterrorism regulations requiring two-year histories on all food shipments.
If you are constricted by these issues and their associated costs, you are probably feeling the industry-wide pinch on your profit margins and revenue growth. But your customers' expectations have not changed.
Today's advanced supply chain solutions can help you transform your business processes so that you can more accurately balance supply with demand, trim processes for inbound shipments and outbound distribution and actually cut down on operational costs and inventory excess. For decades, warehouse management and transportation execution solutions have provided crucial support to the food industry through key functionality to speed product flow through the warehouse—from catch weight and date/lot tracking to temperature zoning and compliance to USDA, FDA, COOL and HACCP standards.
Since your daily operations today hinge on many things outside your warehouse and your immediate control, it is more likely a lack of communication with trading partners that is costing you profits.
Benefits Of Demand Driven Supply Chain
Your supply chain is most effective when it incorporates your warehouse capabilities with other supply chain capabilities—from transportation, order management and labor optimization to planning, replenishment and forecasting—to create a unified, integrated process that offers you enterprise-wide visibility to orders and inventory, source-to-consumption product tracking, real-time information-sharing with trading partners and automated demand forecasting and inventory optimization.
You suddenly have access to the advanced knowledge of a demand-driven enterprise—allowing you to divert your inventory dollars to other capital investments.
An integrated demand-to-consumption supply chain can help you:
- Match orders with inventory: Increased options for inventory allocation can ease the urge to hoard safety stock. A distributed order management solution can optimize inventory at an enterprise-wide level, providing a single view of orders and matching multiple sources of demand with multiple sources of inventory.
With visibility to inbound shipments, you can plan how you will receive and divide shipments before they arrive, optimizing facility space and manpower and distributing certain items to fill immediate orders.
- Synch up with your trading partners: Cooperative technology is beneficial to both you and your suppliers, increases information-sharing and synchronizes business processes. Work with your bigger suppliers to shorten lead times on specific items to help you decrease safety stock.
If your suppliers are growers, farmers, raw material manufacturers or smaller companies without EDI (electronic data interchange) or ASN (advanced ship notice) capabilities, consider investing in a trading partner management solution that offers access to a Web or EDI portal so your suppliers can more easily conduct purchase order activity and provide shipment notifications.
- Boost supply chain execution: Visibility provided by a trading partner management system can work with your warehouse management system to speed scanning and receiving of produce into your facility. This helps you increase your ability to move perishables and other products in and out of your facility on the same day. Advanced cross-docking capabilities such as flow-through and put-to-store processing allow you to divide pallets by store destination or place goods directly on an outbound trailer.
Grocers in the UK have been using these methods to distribute perishables for years. Consider trying these methods out on products that experience high volumes of orders in a short period of time, such as seasonal or holiday goods, when one pallet might be destined for 15 different stores. Called "just in time" inventory, it can help you assign late inbound shipments to outbound company trucks and minimize spoilage.
Advanced warehouse optimization tools such as slotting and labor management solutions can help you improve facility layout and productivity in your facility and reduce product damage and replenishment costs. A slotting solution can optimize the configuration of your facility and keep it optimized on an ongoing basis to maximize throughput. The right automated tools for slotting, labor monitoring (using baseline or engineered labor standards) and workload planning can help you increase productivity, not headcount.
You might want to deploy supply chain solutions that are RFID-enabled and compatible with voice-recognition and other technologies. These are proven tools for reducing distribution and picking errors and increasing productivity and accuracy. Bar code scanning and RFID tags can provide real-time information and product tracking.
- Take more control of goods en-route: Whether you work with a private fleet or contract carriers, consider a transportation management system with fleet management capabilities to optimize planned and opportunistic backhauls and tandem loads and eliminate deadhead miles. Using dynamic and continuous driver and asset optimization, you can remain proactive despite unforeseen changes. Establish automated processes for lane bidding, appointment scheduling and payment capabilities that benefit you and your carriers—and help you become a preferred vendor.
- Plan ahead: Once you have optimized your warehouses and reduced empty miles, consider the true cost of replenishment. With perishable items, effective inventory management and accurate forecasting are essential. A closer balance between your inventory and demand can allow you to reduce inventory levels by as much as 10 to 15 percent.
Look for an advanced inventory management solution that helps you extend visibility upstream so you can anticipate demand, adapt to evolving customer needs and industry changes and proactively set service levels at each tier of the supply chain. Sharing forecasts with your carriers and your inbound transportation department as early as possible can help you improve relationships as well as processes.
Even the greatest buy has labor, transportation and warehouse storage costs associated with it. An integrated replenishment solution can balance all these aspects before the buyer issues the PO—giving you a real-time picture of your company's forecast and helping you ultimately generate a higher return on your inventory investment.
One food service distributor utilized such a solution and was able to reduce inventory levels while experiencing a year of more than 8 percent growth. This can also effectively centralize non-food products that most grocers sell, such as health and beauty aides.
- Take it to the top: One of the best assets of a well-constructed supply chain lies in its ability to provide information on performance for future business strategy and alert you of issues before they become critical. An integrated business intelligence solution tracks and analyzes incremental activities throughout the supply chain so you can provide your executives with a dashboard view of operations. They can measure the information against business strategies to improve margins and stay competitive.
Whatever your choice for your supply chain technology, be sure it is maintainable, integrateable and flexible. Deploy a solution that will allow you to grow with your business so you will not have to invest time and money in pursuing and implementing a whole new solution five years down the road. You can use that money, too, for other capital investments.
Gillies is account executive, food industry, for Atlanta-based Manhattan Associates Inc. His extensive knowledge in the food industry includes more than nine years of hands-on experience with customers in the implementation, design and sales of Manhattan Associates' Supply Chain Solutions.