It is becoming increasingly more expensive to be a food and beverage manufacturer in the U.S. Rising inventory costs, stricter federal regulations and an increasing demand for fresh and frozen foods globally can affect year-end profits. One common expense, however, is forcing manufacturers to revisit their supply chain strategy altogether: Transportation.
Food (and Beverage) for Thought
Transportation is one of the highest, yet most common costs associated with supply chain management within the Food and Beverage industry; the steep prices to transport goods are often non-negotiable and steadily increasing. There are a number of factors affecting these cost increases, too, including higher fuel prices, a shortage of skilled drivers forcing higher wages and an increase in the number of shipments due to more frequent deliveries. In fact, transportation issues are forcing manufacturers to change distribution and production schedules in an attempt to better absorb the financial hit.
Manufacturing costs increase when the supply chain is mismanaged or poorly synchronized. This is especially true for food and beverage manufacturers as their products have limited shelf lives and demand varies in each location, though costs can increase even with an optimized supply chain. One way to combat rising costs is by implementing item level forecasting, which takes note of each item’s demand individually by using the historical demand data for the particular item. This helps to avoid products spoiling on the shelf and the redeployment of excess inventory that goes to the wrong location.
A Synchronized Supply Chain
Transportation may be seen as a necessary cost to a food and beverage manufacturer, but as these costs rise around the world, manufacturers will need to find ways to adapt. In a recent article written for Food Logistics, QAD’s Steve Dombroski discusses the effects of high transportation costs on food and beverage manufacturers and the necessary steps to minimizing unnecessary costs. He speaks to the importance of a synchronized supply chain and the analysis of each piece of the chain to further improve operational efficiency.
“Synchronizing the supply chain is the best approach to solving this problem and will help take a great deal of sting out of increased transportation costs. A synchronized supply chain can allow manufacturers to reduce distribution, manufacturing, inventory and procurement costs, which will in turn increase profits.” – Steve Dombroski, Sr. Marketing Manager, Consumer, Food & Beverage Markets, QAD
To learn more about transportation costs in food manufacturing and the benefits of a synchronized supply chain, read the full story.