The Fresh Foods Industry has witnessed a stream of changing consumer trends.Food Manufacturers are increasing delivery frequencies, place smaller orders and maintain faster order cycle times to meet consumer demands. From a manufacturing perspective, their main concern areas are the ability to change production plan/schedule and visibility about the capacity and material to meet changed customer requirements.
Below is the first of the three part series of the blog where we take you through the Fresh Foods Industry, its typical challenges.
As Fresh As It Gets – An Introduction to the Fresh Food Industry
This is “How” they do it – The Production System
The raw materials required in manufacturing fresh food products are highly perishable. So, the planning and scheduling of the production must be tightly integrated with the raw materials. Also, there is excessive variability in several dimensions for raw materials such as raw milk in dairy or grains in bakery. This may be either due to the seasonality of farm based products or because of the fluctuation in prices owing to variation in quantities procured.
A general characteristic of all fresh food industries is the divergent product flow within the factory. There is always some Semi finished good or intermediate good that is manufactured based on the raw materials. Typically, Fresh foods are produced in batches and the set-up times are sequential which means recipe 1 is produced prior to recipe 2. The level of work in progress is low because of the perishable nature of the semi finished goods and therefore they must be further processed quickly.
Packaging is an important step in the supply chain of Fresh Food Products. The packaging should be in a way such that it prevents spoilage, decay and secondly it should be visually appealing so that the product can be easily found on the shelf. Even within the packaging, the batches are transformed into discrete units.
Storage & Delivery
The last mile is the storage and delivery. Keeping in mind the perishable nature of products, normally low levels of stock are maintained across the value chain. The stock levels are monitored closely and are replenished as per the delivery waves of the factories. Normally the Fresh Foods Industry dispatches goods from the factories in delivery waves which can be 2 or 3. All the orders from the retailers are collated as per these waves and stocks are replenished.
The BIG FIVE Challenges
The fresh food industry is facing numerous challenges to maintain the effective operation of its supply chain. In order to successfully implement any fresh food solution the manufacturers and retailers need to work in tandem by overcoming challenges and also keeping in mind the peculiarities involved in consumer trends. Let’s look at some of challenges:
Due to the high perish ability of the Finished Goods stock, it is of paramount importance to have high speeds in the delivery process as it can affect the saleability of fresh food products. The longer goods stay in transit, the less time they will be able to spend on-shelf.
Right Product Quality
Consumers expect fresh food products while purchasing in immaculate condition. Poor packaging and product storage not only affect the product image, but ultimately decrease the product date-life.
Temperature and Climate Control
The shelf life of the product gets prolonged if there are proper storage mechanisms. For achieving this food manufacturers must invest in the latest supply chain technologies alongside temperature variant storage units.
For fully packaged fresh food items, such as bakery and most dairy products, consumers rely solely on the product label information in order to assess the freshness of the product. If this is incorrect at the point of affixing the label then there could be serious health issues for the consumer, and as a consequence increased costs for the parties involved.
Out of Date Deliveries
This is an industry where product freshness holds utmost importance so much so that consumers may be even willing to pay higher price just to get the perfect quality product. The perishable nature of products can lead to deliveries with expired dates. In such cases the product may be recalled altogether.
Success “Mantras” for Fresh Foods Industry
Control of Distribution Arrangements
This helps maintain product quality through the supply chain by reducing the likelihood of product damage during transit. This will also improve the delivery speed
Proper Supply Contract
Contracts with suppliers of raw materials such as flour and yeast reduce supply volatility.Guranteed supplies at established prices assists in minimizing supply costs.
Economies of Scale
This enables the manufacturer to lower the average costs of production per unit by spreading the fixed costs over greater volumes of production. Cost minimization is particularly important in fresh foods industry where price competitiveness is more.
Marketing of differentiated products
This helps manufacturers capture maximum market share. Production innovation & the introduction of differentiated products help maintain consumer interest and increasing usage.
Effective Quality Control
The ability to implement programs to effectively control quality helps fresh foods manufacturers build reputation for supplying safe food to consumers.
Ability to pass on increasing cost
The ability to pass on increasing input costs, such as flour, to the final consumer helps reduce volatility caused by shifts in upstream industries and helps manufacturers maintain profit margins.
- Do you find difficulty in optimizing your daily production schedule of Fresh Foods items?
- What’s the percentage deviation between the actual and the forecasted demand?
- How do you manage priority demands arriving at the last minute?
- Are you able to optimize your logistics and transportation cost?