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04/28/2021

Navigating the Food Supply Chain: Common Issues and Technology’s Role

Restaurants experience everyday issues within the food supply chain, including evolving consumer demands, product availability and reliable transportation.

The food we purchase navigates through a domino-like motion. When the last domino falls, dinner is served. How the dominos fall in between determines the movement and velocity of food through the supply chain.  If one domino fails to fall, the rest of the food supply chain feels the effects. This often plays out as partially fulfilled orders, delayed deliveries or a surplus of unneeded goods.

In a recent report, nearly 68 million people reported visiting quick- and full-service restaurants for one or more meals per week. With more than 1,966 pounds of food consumed by the average American every year, the food supply chain is responsible for responding to demand: a demand that is consistently impacted by common and unpredictable issues that interfere with supply chain efficiency.

Common Issues

Restaurants experience everyday issues within the food supply chain, including evolving consumer demands, product availability and reliable transportation. While common, each are frustrating elements of the industry. As the food supply chain grows more complex, many producers, distributors and retailers find it difficult to document their end-to-end process. With multiple players in the industry, including those who grow, harvest, process, package, transport, hold and sell food products, it’s essential each understands the supply chain in order to meet regulatory requirements, mitigate risks and satisfy consumer demands with full transparency.

  • Consumer Demands: Responding to consumer demand is a never-ending battle. Data, however, can paint a clearer picture of what the food supply chain can expect year over year. By understanding past trends and the probability of outliers, distributors and manufacturers can gauge how they should make decisions for near- and long-term forecasting. Benefits of assessing demand include:
    • Production efficiency
    • Reduce inventory costs
    • Improve distribution
    • Streamline purchasing
       
  • Product Availability: Consumer demand and product availability go hand in hand. That means streamlined communication between retailer and distributor is key. Supply sourcing strategies can be diversified to meet demand and service level agreements. By helping suppliers ensure they are receiving the resources they need, orders will be fulfilled faster and more efficiently.
     
  • Reliable Transportation: Shipping and transport times are among some of the key factors in determining inventory availability. To better manage lead times, daily forecasts should be revised and shared with partners. By having an open line of communication with a transportation team, key decision makers can get an all-encompassing view of what a company is currently facing.

 

The Unpredictable

As government-mandated closures took effect due to COVID-19, consumer spend on food from quick- and full-service restaurants drastically declined. The food supply chain felt the strain of logistics-specific bottlenecks soon after as restaurants navigated storage-space storages and distributors received thousands of order cancellations. Cancellations then trickled down to the basis of most food in the supply chain: farms. 

With more than 92% of US farms producing food for restaurants nationwide, the sudden closure of restaurants and coffee shops placed pressure on farmers to evaluate current yield, including crops and livestock. The output of crops, meat and dairy products are often projected well in advance and, unlike consumer goods, the production of perishable items, like meat, milk, fruit and vegetables, cannot be paused. As they awaited the reopening of thousands of restaurants, many farms were made to either waste or donate its yield, directly impacting manufacturers, distributors and retailers. While an immense example, the pandemic forced all parties of the food supply chain to reevaluate forecasting and risk mitigation.

When faced with the unpredictable, having a risk mitigation strategy in place can prevent headaches and keep all parties of the food supply chain moving. Risks in the market can include extreme weather, financial crises and the implication of future pandemics. Peet’s, a specialty coffee roaster and retailer, was directly impacted by the unpredictability of the pandemic. With coffee shops closed, consumers found themselves purchasing coffee beans, K-Cup pods and espresso capsules directly from the source, including Amazon and Peet’s consumer website. The company’s online orders quickly increased from 8,000 to 24,000 per week.

Prior to the pandemic, Peet’s implemented the Microsoft Dynamics 365 Finance and Supply Chain Management application. Aside from its warehouse management capabilities, the application allowed Peet’s to make informed decisions about the layout of their warehouse, the renewal of slot planning, put wall picking techniques and the efficiency of sorting and receiving for inbound operations. As unpredictable as the pandemic has been, the implementation gave Peet’s the tools they needed to navigate its increase in direct-to-consumer demand, creating a more agile supply chain for the future.

The food supply chain faces many common and unpredictable issues throughout its lifecycle. By implementing technology that can respond to a wide array of issues, the industry will experience a more transparent and reliable workflow. When all dominos of the food supply chain fall in order, supply chain efficiency will be achieved.

 

ABOUT THE AUTHOR

Michael Mellegaard, Director of Strategy and Solutions at Blue Horseshoe, has over 20 years of experience as a Project Manager, Solution Architect, and Transformation Agent implementing on the Microsoft Dynamics (AX/D365/Customer Engagement) platform and other solutions (Infor and Edwards). Driven by his passion for lifelong learning, Michael has extensive knowledge across a variety of industries including finance, commerce, distribution, and manufacturing.  Michael takes an innovative approach to solution architecture to build the structure of Blue Horseshoe’s solutions and deployment.