Why is it Crucial for F&B Brands to Design an Ideal Supply Chain Network?

In the wake of COVID-19 pandemic, Food & Beverage (F&B) brands are increasingly focusing on improving the performance of their supply chains. Lower footfalls in stores has prompted retail outlets to roll out omnichannel capabilities like direct to consumer (D2C), e-commerce, buy online, pickup in store (BOPIS) etc. so as to reach out to more consumers. Also, the changing demands of the new-age consumer have made them reconsider their supply chain management processes.

In today’s scenario, supply chains for F&B products begin with securing raw materials and often end with the finished product being delivered to the doorstep of the consumer. As compared to other products, they have a lower shelf life, which makes it crucial to maintain high standards of safety and quality control. To achieve this, it is necessary to optimize logistics and supply chain functions. 

Food supply chains are undergoing an overhaul since the start of the coronavirus pandemic. Due to unpredictable demand fluctuations, F&B brands are looking for new ways to strategically and systematically manage their supply chains. To maintain an optimal flow of their goods, it is highly necessary for them to design an ideal supply chain network. 

What makes for an ideal supply chain network design? 

Designing an ideal supply chain network involves determining the most favorable geographical location and transport linkages between manufacturing facilities, suppliers, distribution centers and warehouses. This function is also called network optimization.

How designing an ideal supply chain network benefits F&B brands

Poor network design results in the creation of inefficient supply chains, which leads to reduced sales, lower profit margins and a dip in customer loyalty. As F&B brands have had to scale up their supply chains and expand their product portfolios to cater to the increase in customer demand, they have had to seriously optimize on their network design. Find out the most important reasons for F&B brands to build an ideal network design. 

Addressing demand peaks for the new normal 

Since the start of this pandemic, consumers have increasingly begun resorting to online shopping to meet their F&B needs. Due to sudden changes in consumer demand, at any given time F&B players are either struggling to deal with product shortages or excess supply.   

To counter such sudden demand spikes, F&B brands are increasing the production of certain items. Some of them are focusing on scaling their D2C and e-commerce. Irrespective of these moves, they are still struggling to manage the swift changes in customer demand. 

Which is why implementing the ideal supply chain network design is crucial for F&B brands to swiftly address their demand peaks, and avoid excess costs. It also helps them integrate their communication channels and brings reliability to supply chains. In short: designing the ideal network makes a huge difference between F&B brands that survive and thrive in this new normal.  

Visibility and seamless communication among network partners

Digital supply networks are the bridges that connect the F&B brands with their trading partners. It determines the visibility, flexibility, agility, transparency and traceability of their supply chain. A lack of transparency, coupled with outdated systems, traditional paper processing and manual data processing aggravates risks for their business.  

F&B brands should have proper access to relevant data and a clear flow of information to gain critical insights on their partners’ activities. Lack of communication between network partners results in huge information gaps, thereby adding up inefficiencies and mistrust. If proper attention isn’t given while building network designs, these information gaps can dampen the efficiency of supply chains while expanding. 

Visibility on all supply chain activities and fostering end-to-end communication enables networks to react quickly to ongoing changes in demand. It helps F&B brands to move their products efficiently based on when and where it is needed. 

An integrated network optimization solution helps F&B brands to develop an ideal network design that ensures proper communication flow between network partners. It helps them to avoid the burdens of customizing for every channel, network partner or every individual supplier in their network. Its real-time insights on customer demand, logistics data and inventory management enables frontline managers to quickly respond to the changes in customer demand.  

Improve real-time tracking abilities 

F&B brands sell a massive volume of goods to a huge number of customers through intricate supply chains that consist of enormous distribution networks. In order to process these large inventories quickly, real-time access to the current status of jobs is essential. Given that they deal with multiple manufacturing locations, they require tech tools to regularly monitor the supply and demand information. 

With a centralized view of operations, network optimization solutions help F&B brands to view multiple warehouse locations as a unified distribution network. This helps them avoid data silos and optimize supply chains by overcoming geographical barriers. Through an ideal supply chain network design, F&B brands can minimize lead times and transportation costs, thus maintaining the freshness of the product. 

Build a strategic location for warehouses 

Streamlining food distribution plays a crucial role in the productivity of F&B brands. To attain improved productivity levels, their third-party logistics partners should be located closer to customers like freight corridors, ocean terminals or railroads. This helps them to reduce the time taken to distribute goods and minimize the costs incurred from transporting them. 

An ideal network design that locates second-mile or last-mile warehouses determines the efficiency of last-mile delivery. Network optimization solutions help F&B brands decide their strategic warehouse locations for effective last-mile deliveries. Based on data inputs, it helps them decide the right warehouse location that is closer to customers. This helps them ensure that their goods reach customer locations without spending too much time on the road. 

Optimize product flows in supply chain networks 

The biggest concern for F&B brands is knowing when to start production to ensure sufficient capacity during demand spikes. Another huge concern is managing storage costs of products. To address both these concerns, it is necessary for them to optimize product flows in supply chain networks.  The positioning of warehouses and inventories play an important role in optimizing product flows. 

When F&B brands have to position their inventory and warehouses, they need to know the right stock levels to manage out-of-stock situations. They also have to face some crucial questions such as:

  • When to store products? 
  • Where to store products?
  • How many products should be stored to avoid risks from spikes in demand? 

To reach an optimal decision on product flows, many supply chain planners juggle with trade-offs emerging between:

  • Delivery performance
  • Capacity
  • Storage
  • Transportation costs and 
  • Production

In these situations, F&B brands need proper tech assistance from a tool like network optimization software. 

A good network optimization software helps supply chain planners to build a theoretically optimal solution for product flows. It runs scenarios to come up with an optimal product flow that determines production capacity and calculates raw material requirements based on the expected changes in customer demand. Beyond making delivery planning economical, it helps them achieve their business goals with their current resource availability.  

Conclusion

When it comes to meeting the spikes in demand for F&B players, the oversupply of products may lead to increased wastage, while undersupply may result in missing out on catering to potential customers, leading to a fall in profits. If products are late to arrive at a location, it leads to slow lead times and increased transportation costs. 

A well-integrated supply chain network helps F&B brands meet their consumers at the right speed, right time and sell the right quantity of products. It helps them effectively improve their warehouse utilization, thus reducing the warehouse costs. A smart tech tool that helps supply chain managers make right decisions on designing their F&B supply chain networks is the need of the hour. 

Locus NodeIQ helps F&B brands to scale their product based on their business goals and changing consumer demands. It helps them dynamically create and analyze multiple scenarios with a large set of simulations and models that factor in multiple business parameters. Its digital-twin solution provides comprehensive geospatial visual simulations of their network design and helps them to generate usable and optimal real-world solutions. 

To design an ideal network for your supply chain- Schedule a demo now!

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