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.
More Resources
Transform Your Fresh
Food Supply Chain
Tame the Global Food
Supply Chain
More on Trends and
Challenges in the Food and Beverage Industry
Photo Credit: Steve Snodgrass