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Our Take: Five C-Suite Level Concerns within the Food and Beverage Distribution Network

By Bob Kyle  September 23, 2015

I recently saw a piece from Penske Logistics about the Five C-Suite Level Concerns within the Food and Beverage Distribution Network. The piece addresses some key concerns executives have when they see the holistic, end-to-end view of their supply chain network. The five concerns discussed in the article are cost, network efficiency, recalls, temperature control and consistency. Many of these points resonated as they are concerns we help our customers strategize for and overcome every day.

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Cost

Transportation costs are continuing to rise across industries due to a number of factors including port strikes, driver shortages, fuel prices and more. Many of our customers utilize transportation optimization to assess changes to strategy to decrease costs including using fewer lanes, considering private fleets and much more. While some minor adjustments to the current strategy might seem to be just that, minor, many food and beverage companies uncover millions in savings by designing new more robust networks that meet or exceed customer service expectations.

Network Efficiency

It’s difficult to reach logistics goals without a smartly designed network. The efficiency or inefficiency of the supply chain can have ripple effects throughout the entire organization. In the past network design was viewed on an occasional, once-a-year basis, but we are finding that the companies that are beating the competition and gaining a competitive edge are thinking about their network design differently. Those organizations are adopting supply chain modeling on an ongoing basis as a business process to allow them to have a constant and consistent view of the end-to-end supply chain providing them with the most accurate information that enables them to respond to risks nimbly.

Recalls

Recalls are inevitable fact of the food and beverage industry. Unfortunately a food recall can sometimes derail a company’s supply chain, causing them to not only lose money due to the wasted product, but also by losing in terms of additional costs, unmet service and more. With supply chain modeling and the use of simulation technology, companies can run a number of scenario analysis to plan for curveballs and put together a strategy within the safe confines of their model.

Temperature Control

Adding another layer of complexity to the food and beverage supply chain is the consideration of temperature control. These products, due to the nature of the products, typically have very stringent end-user constraints. To comply with regulations and meet serve levels an accurate transportation design and cost-to-serve modeling approach is necessary.

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Consistency

While important for every industry, the key to consistency in the food and beverage industry lies in demand segmentation and classification. This ties in closely with temperature control as food waste is a continuous problem in the U.S. In order for companies to meet service levels while keeping waste low, segmenting and product classification more accurately determines the correct amount of safety stock to hold on a product by product basis.

One other topic that can cause sleepless nights worth consideration is Allocation.  The challenge lies in knowing where to produce what products to minimize the total landed cost. Also, there is quite a bit of M&A and consolidation activity amongst food manufacturers, and they have a diverse amount of finished products.  Knowing how to leverage existing manufacturing capacity amounts the activity above typically can generate abundant savings.  For example, a beverage company may have multiple brands under their umbrella, each targeting a different consumer by ingredients, flavor, price-point, etc. Those organizations can utilize supply chain modeling technology to determine what products should be allocated to what facility at what time to meet service levels.

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The challenges facing every food and beverage company differ, but ensuring a sound supply chain design strategy is in place to address the challenges above is a good place to start to ensure you’ll be able to compete in the global food and beverage market.

Click here to learn more about LLamasoft’s work with global food and beverage companies.