The best recipe for an optimized food manufacturing supply chain involves a blend of demand and manufacturing planning plus inventory optimization. These disciplines help food manufacturing companies achieve higher service levels at dramatically lower inventory cost with maximum equipment utilization. Using data-driven demand planning aligned with analytics-driven production planning, inventory optimization can help mitigate the impact of wild commodity price swings, market variability, seasonality, promotional events.
The food manufacturing supply chain faces all the usual supply chain challenges, from lead times to demand uncertainty, from excess inventory to manufacturing constraints—each given a unique twist due to factors like perishability, short shelf lives, and volatile commodity price fluctuations. To meet business goals and stay competitive, food manufacturers have implemented key strategies to synchronize demand and supply.
Now more than ever, service levels and costs are dependent on planning processes that provide:
- Long-term visibility to uncertain demand
- Efficient capital equipment utilization
- Optimized production given real-world manufacturing constraints
To minimize inventory cost and maximize equipment utilization, the long-term demand forecast must establish the best mix and quantities of products to be produced. Then production planning and scheduling must minimize the impact of finite equipment capacity, supply seasonality, and production line changeovers related to preparation, cooking, filling, labeling, etc. Fresh-pack manufacturing and off-season processing must be planned carefully and sufficient capacity must be allocated to pre-processing of ingredients during the harvest to meet the material requirements for off-season manufacturing.
This white paper outlines how to treat inventory as an input to the business plan — not as an output of the manufacturing process — to maintain sufficient inventories and meet customer service mandates without holding excess inventory.