Food & Beverage Looks Closer at Supply Chain, Distribution Channels to Quell Rising Costs

Ketchup, french fries, soft drinks, cereal, milk, coffee, and sugar. No, this is not my grocery list; it's just a sampling of food and beverage (F&B) items that have become more expensive in the past six months.

But this is not surprising, given unsteady commodity prices and economic uncertainty. In fact, when we published the Top 11 Priorities in 2011 for Profitable Growth in the F&B industry, mitigating commodity price increases and controlling operating costs were two of the top items.

Now, Tompkins Associates' experts have taken a mid-year look at these priorities to see if our predictions are coming true and to catch what we may have missed earlier. It is true that commodity price surges and higher transportation costs are affecting F&B supply chains; however, we did not predict that it would happen so quickly or exactly how companies would respond.

Integrating commodity purchasing and logistics strategies has become a top priority for F&B companies in the cost-cutting arena. How are they accomplishing this? One way is through Direct Store Delivery (DSD) of products, using strategic network designs and supply chain solutions to both sell and distribute directly to the point of sale.

DSD has been used extensively in the fresh food supply chain for products such as milk and bread in which the number of days until sold is an issue. But in today's economic climate, I am seeing wider use of DSD among some of the larger companies that want better control over costs.

And retailers are pleased with DSD vendors, according to a study conducted earlier this year via the Food Marketing Institute and Grocery Manufacturers Association.

So is DSD a trend for the future or a temporary response to price increases? Regardless, scrutinizing the supply chain and distribution channels to improve operations is always a smart choice when it comes to beverage and food distribution.


Jim
Tompkins Associates