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

July 29, 2011
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 ...

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

About the Author

Jim Tompkins | CEO

Dr. James A. Tompkins is an international authority on leadership, logistics, material handling, outsourcing, and supply chain best practices. As the founder and CEO of Tompkins International, he provides leadership for Tompkins globally.

His 30-plus years as CEO of a consulting / integration firm and his focus on helping companies achieve profitable growth give him an insider’s view into what makes great companies even better. Listen to an interview of Jim Tompkins on the Business Leader Radio show.

As a high-level business advisor, his unique perspective prepares corporations and executives for the future.

To share his knowledge and provide up-to-date information on supply chain and business trends, he developed the GoGoGo! Blogand Global Supply Chain Podcast.

He has written or contributed to more than 30 books and eBooks, including Caught Between the Tiger and the Dragon, Bold Leadership, Logistics and Manufacturing Outsourcing, The Supply Chain Handbook, andNo Boundaries. Jim has been quoted in hundreds of business and industry magazines such as The Journal of Commerce, Supply & Demand Chain Executive, and FORTUNE, and he has spoken at more than 4,000 international engagements.

Jim has served as President of the Institute of Industrial Engineers, the Materials Management Society, and the College-Industry Council on Material Handling Education, and Purdue has named him a Distinguished Engineering Alum. He has also received more than 50 awards for his service to his profession.

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