Five Capabilities to Take the Food and Beverage Supply Chain to the Next Level
Food and beverage supply chains face mounting pressure to reduce costs, add more value and do more with fewer resources. All while the pace of new product introductions increases, customers become more demanding and the need to serve multiple channels grows. For many F&B companies, the basic tenants of a supply chain planning foundation is established. Now, it is time to step up your game to the next level of planning and optimization maturity.
There are five capabilities that are the most logical areas to focus. This list is not meant to be accomplished all at once; instead evaluate your internal priorities and capabilities and then take these on as your organization is able.
1) Supply Planning and Optimization
Food and beverage companies run on razor-thin margins. Optimizing end-to-end supply chain operations should be a top objective of an F&B supply chain leader. The only way to accomplish this is through solving for the optimal supply plan while simultaneously considering all constraints, costs and capacities across the extended supply chain. Supply planning enables you to profitably satisfy market demand through dynamically sourcing materials, optimizing production and manufacturing plans, reducing distribution costs and slashing lead times.
This is accomplished through powerful and easy-to-use optimization algorithms, the evaluation of multiple supply plan alternatives through numerical and graphical simulations, and multiple “what-if” analyses.
2) Multi-Echelon Inventory Optimization (MEIO)
The F&B supply chain tend to be inventory rich with average days of inventory still hovering in the high 30 days of coverage range. Reducing inventory while maintaining or improving customer fill rates should be a high priority project for any company. Typical inventory optimization efforts determine the best finished good inventory positions at each inventory stocking location independent of other stocking locations or of raw materials and work in process inventory. Location-by-location and type-by-type inventory optimization produces sub-optimal results. Multi-Echelon Inventory Optimization (MEIO) is a superior method that takes a holistic approach to inventory optimization by considering all levels and locations of inventory in the end-to-end supply chain simultaneously. MEIO can provide deeper insight into inventory challenges throughout the supply chain, including manufacturing, distribution center, supplier and in-transit product. An MEIO approach addresses both demand and supply variability determining the optimal locations to hold inventory in the optimal amounts to minimize overall system inventory while meeting customer requirements. Companies that have implemented a MEIO strategy have been able to reduce total system inventory by 20% or more.
3) Advanced Planning and Scheduling (APS)
As food and beverage manufacturers become more demand-driven, often there is a shift toward more frequent changes in production runs. These market requirements must be balanced with the traditional desire for maximum production efficiency. Changeovers are among the most difficult constraints to optimize, and this places even greater pressure on manufacturing teams to be more agile to minimize lost production time and capacity.
You can minimize changes due to activities such as allergen cleans and packaging configuration by optimizing the sequence of products through the manufacturing line. If changeovers vary considerably, you may need to optimize the sequence of the products in a given production timeframe. Every manufacturing plant has its own distinct characteristics and operating requirements, so your planning solution must quickly adapt to the characteristics of the plant and not the other way around.
4) Advanced Analytics
The use of predictive, prescriptive and cognitive analytics in the F&B supply chain can lead to the next competitive breakthrough. Companies can use data to support “fact-based” decision-making to mitigate risk and capture business opportunities. Advanced analytics is the autonomous or semi-autonomous examination of data using sophisticated techniques and tools to discover deeper insights, make predictions or generate recommendations. Predictive analytics helps companies get out in front of events and disruptions to enable a proactive approach to determine “what will, or could, happen”. Prescriptive analytics answers the question, “what should I do” to maximize profits, minimize costs, and/or meet customer requirements. Cognitive analytics is the highest stage of analytics and involves automated resolution through artificial intelligence and machine learning. Data used for advanced analytics can come from a company’s internal sources, such as its enterprise resource planning applications, from a partner, and/or from public sources. Advanced analytics allows companies to leverage the tremendous amounts of big data available today, including both structured data, such as from sensors, and unstructured data, such as from social media.
5) Integrated Business Planning (IBP)
Today most successful F&B companies conduct a tactical sales and operations planning (S&OP) process to align and synchronize supply with demand. Many also have strategic planning processes for financial planning and long-term investment decisions. However, few F&B companies have integrated their tactical and strategic planning processes. S&OP and strategic planning processes are run by different people, are based on different data and business assumptions, and produce completely separate and often misaligned plans. Integrated Business Planning (IBP) gives you the opportunity to unite strategic and tactical planning to represent both volumetric and financial information into one flexible planning and decision support capability for strategic and tactical planning. IBP combines data from sales, marketing, production, procurement, transportation and finance to create a powerful decision center for all stakeholders. By removing organizational and technology barriers, and aligning and synchronizing plans, an IBP platform ensures your business plans are rooted in feasible supply chain network capabilities, with resources and investments deployed where they are most effective in achieving business goals.
Developing superior supply chain capabilities has become a necessity to survive in the highly competitive food and beverage industry. Advanced supply chain capabilities built on a strong a flexible supply chain foundation can help to automate many day-to-day activities and allow your supply chain team to focus on higher-level strategic actions that create a sustainable competitive advantage. Where is your company at adopting these five advanced supply chain capabilities?