Effective Execution in a Demand-Driven World

The useful shelf life of products is also paramount in food and beverage industry. Freshness and aging dates by inventory lot often dictate a (near) make-to-order supply philosophy. Visibility of age/shelf life by product and lot in every inventory location is critical to minimizing expiring lots and product waste. Aging dates also allow for maximizing sales demand opportunities, such as providing customers with a guaranteed number of remaining shelf life days for perishable products, at the time of sale and delivery. And shelf life concerns don’t end with the sale. Retailers and food service customers often negotiate value add services with manufacturers, to return expired goods and provide credit towards the next delivery.

Efficient Supply Chain Responsiveness

Of course, food and beverage manufacturers are most profitable when they have long production runs per product, and can improve manufacturing efficiency due to less changeovers, etc. Longer production runs often also improve product quality and yield. But in a demand-driven world, smaller production runs and more frequent customer deliveries can make long production runs unfeasible. Manufacturers are being challenged to eliminate inefficiencies of shorter production runs through better planning and scheduling, to free up plant capacity and minimize labor/changeover costs, to provide a competitive, higher level of customer service. This means the need for sophisticated planning and scheduling is even greater in a demand-driven world.

A service-oriented procurement strategy allows manufacturers to leverage the value add services of their suppliers, where procurement previously focused on one number – price per unit. Buying products based solely on a low price point, while oblivious to demand or capacity, can ignore the strategy of companies who themselves compete based on value added services, and not on price alone. Demanding value-added services from your suppliers for the same price, rather than demanding lower prices, can be innovative. Ideas for value add supplier services often come directly from production or warehousing, where convenience drives ingenuity and makes executing daily task easier. Leverage collaborative relationships with trading partners, just as certainly as they leverage their relationships with you.

Food and beverage distribution channels also provide opportunity for value-added services in the demand-driven supply chain, beyond the products they provide. Manufacturers of fresh products (i.e. dairy, meat, produce, and bakery goods) will often invest in a fleet of route vehicles, or contract with route delivery providers, to make frequent deliveries to their customers, often multiple times each day. To better manage costs, route vehicles and direct store delivery carriers also offer expanded products and services to customers, beyond those they themselves manufacture. Every aspect of your supply chain can be evaluated for opportunities to offer added value to your customers.

Making and stocking products in inventory is a traditional way of managing variable demand. But the added costs of safety stock can include: raw materials, packaging, manufacturing machine & labor, warehouse movement, storage at multiple locations, and transportation through distribution channels. Such costs must be balanced against the risk of failing to achieve agreed customer service targets. Shifting emphasis from inventory levels at supplying warehouses, to measuring and managing demand/supply at the point of use, is key to understanding trade-offs, to maintain and improve service levels and competitive market share.

Summary

While improving responsiveness to customer demand is important, being demand-driven is about more than just being responsive and executing efficiently. Having real-time visibility of inventory at the point of use, and anticipating customer demand from this, provides new opportunities for manufacturers to begin influencing and shaping customer demand.

Beth Berndt is director of industry solutions for consumer products at Ross Systems. Reach her at 770-351-9600 or [email protected].