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9 Challenges Facing Procurement in the Food and Beverage Industry

Mar 31, 2017

Food and beverage procurement can be a very difficult process to manage. It is also an area where considerable savings can be found, or where costs can run out of control. But aside from this, procurement is often where plans are turned to actions, as the department looks for the best ways to put new strategies in motion. It takes thorough planning to manage the food and beverage industry supply chain, and good analytics and software can go a long way to smoothing out the process. Here are some of the challenges currently facing procurement in the industry.

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Key Challenges Facing Procurement in the Food and Beverage Industry

Pressure to be environmentally friendly

Consumers are increasingly making sustainability a priority in their purchasing decisions. They look for products with minimal packaging and with materials that can be recycled. However, it can be a challenge to find or produce packaging that meets those qualities while still being affordable and practical. Such packaging needs to be food-safe and able to contain the product without breaking or leaking. It also needs to withstand transit to its final destination.

Demand for local products

Local products are becoming more popular in the market. However, these products can be more expensive and harder to acquire in sufficient quantities. Farmers’ markets and independent stores and restaurants can draw some consumers away from larger chain stores because of their ability to offer these local items.

Quickly changing food trends

Some trends last for a long time, even becoming mainstays in the food and beverage industry. However, others are simply fads, and can disappear soon after they rise to popularity. This can make it difficult for restaurants and vendors to keep up — new products take time to develop and perfect, and it can therefore be hard to find a supplier that can meet consumer demand when a trend arises suddenly. Companies need to balance the advantages of getting in on a new movement early with the difficulties of sourcing quality products.

Managing suppliers

Food and beverage procurement tends to involve a large number of suppliers, even for smaller businesses. Finding good suppliers and favorable deals, as well as keeping up with changes in pricing, terms, and other factors, can be a very complex task. Good software and staff are essential to getting the most value from the supply chain.

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Keeping on top of regulations

Laws can change frequently, and new ones come into place. It is important to be aware of regulations that affect your business, in both good and bad ways. For businesses that operate across a country or internationally, this can be even more difficult, as laws will vary from one area to another. And if suppliers are in a different location that your business, or in multiple different locations, this becomes even harder to manage. It is necessary to ensure that the products and processes of all suppliers comply with laws from each region in which you operate.

Minimum orders and bulk discounts

Small companies and those that need small quantities of particular order face issues around high prices. With margins already low in the food and beverage industry, it is important to minimize costs as much as possible in order to remain competitive as well as profitable. One way to overcome this is to join a group purchasing organization, which allows companies to take advantage of bulk orders despite needing small amounts of an item. To gain detailed insights into the direct procurement and indirect procurement, request more information here!

Meeting demand for organic foods

Growing numbers of consumers are demanding organic products, but these items are by nature more difficult to produce, ship, and preserve. Because of the difficulties in converting a farm into one that can produce organics, as well as producing acceptable-quality products without the use of pesticides, it can be a challenge for purchasers to find sufficient supply. It also becomes necessary to have multiple suppliers from different regions in order to obtain a necessary variety of products.

Seasonality and perishability

Making certain food items available year-round and keeping them fresh is an ongoing challenge. While this is easier than it has been in the past, it still creates complexities in supply chain management. It is necessary to balance consumer desire for local products with the need to have sufficient quantities at all times, requiring multiple suppliers that vary depending on the time of year. It is also important to ensure that perishable items reach their destination intact, and also remain good long enough for the customer to buy and consume them.

Avoiding empty shelves and overstocking

It can be very difficult to predict customer demand, even with solid knowledge of the market. Sales can be more popular than expected, or a piece of news could reduce demand for a particular product, or suddenly something is identified as a super food and everyone wants it. Empty shelves mean disappointed customers and lost sales, so companies often choose to err in favor of too many items rather than too few. This leads to waste, however, both in terms of garbage and spending. One way to overcome this is by taking advantage of predictive analytics, which can help make orders more efficient.

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