Three Practices for Supply Chain Management in the Food Industry

By Kevin Hill
1 Comment
March 3, 2017


• Categories: Food Manufacturing, Foodservice & Retail, RC - Food Safety Management System

While building an effective logistics strategy, the end goal of supply chain management (SCM) needs to be kept in mind (i.e., allowing each member of the supply chain to achieve efficient inventory management as well as reach its customer service goals). To this end, it’s important to share information that will help each member achieve success. This includes data relating to demand forecasts, anticipated lead times and safety stock quantities. Let’s look at SCM best practices for food manufacturing and supply, and how this information plays a role.

Effective SCM: Best Practices for the Food Industry

Here’s an overview of SCM best practices in food supply and manufacturing:

Learn more about managing your supply chain at the Best Practices in Food Safety Supply Chain conference | June 5–6, 2017 | LEARN MOREDemand Forecasts. This is generally based on demand, sales or usage patterns in the past. However, future demand can be affected by changing situations such as:

• Gaining/losing customers
• Increased/decreased product popularity
• Introduction of new products
• Short-term increase in demand through promotions, etc.

Better estimates can be achieved with an effective derived demand or a CPFR (collaborative planning, forecasting and replenishment) system. This can be done through automated data collection, or by the following process:

• Identifying customers who can predict future demand (i.e., what they may use or sell in the future)
• Collecting demand forecasts about specific products from them
• Comparing these forecasts against their actual purchases on a monthly basis
• Helping them improve future predictions by sharing this data with them

Customers may overestimate demand, but you might consider offering a discount based on accurate forecasts to encourage better results. In addition, you should also consider these five elements:

• Usage patterns in the past, not including CPFR data
• Increasing/decreasing product popularity trends
• Higher/lower seasonal usage or demand
• Events/promotions in the near future
• Market and industry data from sources such as management, sales, etc.

Anticipated Lead Times. In addition to an accurate demand forecast, you also need to anticipate the lead time for inventory replenishment. Consider these four elements:

• Time required to place an order
• Time taken for order processing and shipment
• Timeframe till delivery to your warehouse
• Preparation time for use/sale of stock receipt

The accuracy of anticipated lead times also needs to be established. Use a report that checks these elements of a stock receipt:

• Whether the lead time is 50% higher than anticipated
• Whether the lead time is 50% lower than anticipated
• Whether lead time is more than seven days late/early

Sharing this information with vendors helps you ensure that future replenishment orders are placed in time. Check with them if future lead times will be the same or if they were caused by one-time factors. If they continue to be inconsistent, you may need to look for other reliable vendors.

Safety Stock. Even with accurate demand forecasts, maintaining a safety stock or extra inventory is a good idea. The more accurate your future demand predictions and anticipated lead time are, the less safety stock you will need to maintain. Still, replenishment orders may arrive late, or you may sell more than you anticipated.

It’s also essential to weigh final products accurately before packaging, using automated weighing and packaging scales. Here’s why:

• Production becomes more scalable, dependable and reliable
• Weighing and packaging processes become faster and simpler
• Shipping costs and packaging expenses are minimized
• Final product packaging is more refined, consistent and uniform
• Accurate product weight and size is maintained according to FDA regulations
• Safety is improved and health risks are significantly reduced
• Warehousing, shipping and delivery become more convenient
• Tracking lost/damaged materials becomes easier

FSMA and Stricter Regulations for the Food Industry

FSMA gave the FDA more authority to regulate the growing, harvesting and processing of food. Today, the FDA requires comprehensive, preventive-based controls across the food supply chain. It also issues regulations to protect against deliberate contamination, preparing and protecting the food supply chain at specific vulnerable points with preventive strategies.

Stricter regulations for food manufacturing and supply only add to the worries of supply chain managers, making cooperation between manufacturers, vendors and customers even more critical. It may just be time for companies involved in food manufacturing and processing need to look at SCM best practices a little more seriously.