Global supply chains are feeling it. Retailers and consumers
are feeling it. We see it on the supermarket shelves and in the produce aisles.
We talk about it over lunch.
As commodity and oil prices continue to rise, so do food
prices. A harsh winter for much of the world, coupled with uncertainty in
oil-producing countries and an overall greater demand for food, has led to a
recent surge in food prices. Mix this with a spoonful of dampened consumer
confidence and dash of slower economic growth, and this can quickly become a
very bitter dish.
So what can you do – as a supply chain leader in the food
and beverage industry – to minimize this impact within your operations and on
your customers?
I recently discussed this issue with a food company
executive, and he had some interesting insights to share:
- Organizations
are doing what they can to avoid passing on cost increases on to consumers;
however, consumers are now seeing price hikes of anywhere from 3% to 12%,
depending on the product.
- His
organization (like others) is more closely examining their supply chain
processes to find ways to offset costs, including technology enhancements and
packaging changes.
- Companies
are applying best practices to transportation in order to minimize fuel costs,
focusing on freight management and outsourcing to LSPs.
- When
feasible, some segments of the food and beverage industry (such as produce) are
sourcing locally to contain rising costs.
Given the above points, it seems clear that now is the
optimum time for food and beverage companies to give their supply chains a
“health checkup” and find further ways to cut costs. Passing price hikes on to consumers and
shrinking package sizes are limited tactics in today’s marketplace. For
long-term success, supply chain strategy is the best place to look.
Go!Go!Go!
Jim
More Resources
Food & Beverage Solutions
Top 11 for 2011, Food & Beverage
LSP Supply Chain Consortium