Recent trends in the food industry demonstrate that food companies are enhancing their supply chains by focusing on three areas: Improving efficiency, resilience, and visibility. Here are examples of how several leading food companies have recently incorporated best practices to make meaningful improvements in these five areas:
Best Practice 1: Invest in Your Distribution Network. Many food companies strategically allocate resources and prioritization to enhance efficiency, reach, and customer satisfaction within their distribution channels. This will require analyzing your current distribution channels, researching potential channels, optimizing logistics resources and partnerships, investing in technology, potentially adjusting or expanding your market reach, monitoring and measuring results, and ensuring continuous improvements.
Best Practice 2: Optimize Inventory Management. Implement robust inventory management systems to track stock levels, minimize waste, and prevent stockouts. Consider using demand forecasting tools to predict future needs and optimize inventory levels.
Giant Eagle, one of the nation’s largest food retailers and distributors (and member of Food Shippers of America) successfully transitioned three of its distribution centers (DCs) from an on-premises Manhattan WMS to Manhattan Active Warehouse Management. The grocery retailer plans to shift its remaining four DCs by August 2025.
Best Practice 3: Enhance Supplier Relationships. Foster strong relationships with suppliers through collaborative communication, regular performance reviews, and supplier audits. Diversify suppliers to reduce reliance on a single source and mitigate risk. This also requires that you effectively and routinely review your supply chain partners – and perhaps even assess your RFP process.
In fact, when Materne North America attended a recent conference, they didn't just participate; they absorbed a wealth of insights that would shape their future strategy. At the time, snack food company was navigating the challenge of quarterly RFPs. However, armed with newfound market expertise and powerful data from Capac-ID, they made a bold move to transition to an annual RFP.
From these conversations, Materne North America was able to engage in dynamic dialogues with their suppliers, successfully negotiating to maintain rates through the second half of the year. But they didn't stop there. By leveraging these insights, they crafted a strategic RFP that aligned with market conditions and decoupled freight from fuel spend. This shift allowed them to establish a zero-base rate and elevate their fuel efficiency expectations from 6.8 to 7.4.
Best Practice 4: Automate Your Supply Chain through Technology. Leverage technology to automate processes, streamline communication, and improve data visibility across the supply chain. Explore supply chain management software solutions to optimize inventory, track shipments, and manage orders.
For example, Walmart has been slashing U.S. delivery costs by automating its supply chain – including automation in more than 50% of its fulfillment center volumes. Increased automation and more efficient driver routes helped the retail giant accomplish the feat for the third consecutive quarter. In fact, Walmart has significantly reduced its U.S. net delivery cost per order by 40% in Q3 2024 for the third consecutive quarter, according to Executive Vice President and Chief Financial Officer John David Rainey during an earnings call on Nov. 19.
As Walmart scales its store fulfilled delivery business and expands its catchment areas, the mega-retailer has experienced significant improvement in batch density with orders per delivery up 20%, Rainey adds: “In addition, the popularity of expedited delivery has resulted in more than 30% of orders coming from customers and members that elected to pay a convenience fee to receive their delivery in less than one hour or less than three hours.”
And lastly, Walmart continues to make progress in the automation of its supply chain, as now more than 50% of the company’s fulfillment center volume is automated - which is twice as much at this same time last year. This has the obvious benefit of lowering the per unit cost of delivery. These factors contributed to the third consecutive quarter of approximately 40% reduction in U.S. net delivery cost per order, according to Rainey.
Focus on Demand Forecasting: Utilize data analytics to predict future demand, enabling you to optimize production, inventory, and logistics to meet customer needs effectively.
For example, Sunsweet Growers (a major producer of dried fruits) found that while it was managing distribution operations well, high production costs were inflating end-to-end supply chain expenditures. Upon further exploration, the company found that its distribution network was partly behind the problems.
Sunsweet explored network redesign options to eliminate some production costs and shifted its approach to demand forecasting from a manual forecasting approach using only spreadsheets to an elaborate use of supply chain planning technology. Sunsweet also implemented a sales and operations planning program (S&OP) that enabled plant resource requirements to be anticipated months (rather than weeks) in advance. As the overall improvement plan passed through its five phases, Sunsweet was able to reduce production costs, increase in forecasting accuracy, reduce overtime in production facilities, significantly reduce finished-goods spoilage, and cut the number of U.S. warehouses from 28 to just eight. In addition, a transportation cost-per-unit remained static for two years despite increased utilization of costly refrigerated transport and rising fuel costs.
Best Practice 5: Prioritize Food Safety. Implement tracking systems to monitor shipments in real-time, gaining insights into the location and status of goods throughout the supply chain.
Chipotle Mexican Grill is scaling up its use of radio-frequency identification technology (RFID) to trace ingredients from suppliers to restaurants in real-time and strengthen its inventory systems, says Carlos Londono, Vice President of Supply Chain at Chipotle Mexican Grill. A leader in food safety within the restaurant industry, Chipotle is one of the first major restaurant companies to leverage RFID case labels to track ingredients from suppliers to restaurants via serialization.
Armada, one of the largest outsourced logistics providers to the U.S. foodservice industry, has implemented policies and procedures in compliance with regulations, client expectations, and global food safety standards to ensure product integrity is maintained.
He mentions the company also takes it a step further and voluntarily certify to the minimum-security requirements of Customs Trade Partnership Against Terrorism (CTPAT), which is a U.S. Customs and Border Protection program that focuses on securing international supply chains. Armada leverages the CTPAT program requirements in development of its domestic programs where it helps mitigate risk, such as using ISO 17712 compliant trailer seals and verifying seals using the VVTT method:
“We require that carrier partners monitor trailer seals while the load is in-transit and are required to advise us if there is an issue with trailer seals at any stop,” he continues. “We follow the rule that any load at rest is a load at risk.”
Armada’s QA Team leads the investigation for any food safety/security issues that occur throughout the supply chain. By partnering with the company’s supply chain partner’s Quality Assurance (QA) Teams, Armada is able to determine if products are safe to continue to their destination.
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