By: George Mathew
Advancements in technology, changes in consumer preferences, and a growing emphasis on sustainability have shifted focus from traditional methods of procurement of food to innovative and efficient practices.
The advent of online platforms and e-commerce has made it easier to connect with suppliers and consumers. Online platforms eliminate the need for intermediaries, thus reducing costs. It also provides small-scale players with access to a wider audience.
Consumers, nowadays, are increasingly opting for healthier and sustainable food choices. They are conscious of the environmental impact of their food choices and demand that ingredients are sourced ethically and are organic as well as environment friendly.
Furthermore, emphasis on sustainability is transforming how food and beverages are sourced, distributed, and consumed. This includes using environment-friendly packaging, reducing waste through composting and recycling, and reducing miles by opting for local sourcing.
The new shift in the food and beverage procurement for successful businesses
Post pandemic, the adoption of technology in the food and beverages market has increased manifold. Social distancing enforced during the pandemic led enterprises to embrace digital transformation to keep pace with market changes and consumer demand. Contactless payment is one such digital solution that gained popularity during this period. Also, several supply chain startups started offering end-to-end services that use automation to place stock refill orders when it dips below a preset level. For instance, SaaS-based platforms offer restaurant managers access to data at their fingertips, thereby improving their price negotiations with vendors and communication with different stakeholders.
Adoption of automation to improve efficiency:
The food and beverage industry has been exploiting data to enhance the quality of service delivered to customers. Players have been incorporating automation technologies. This, in turn, provides restaurant owners with real-time access to information such as order logs. The availability of such data at the fingertips improves supply chain transparency and process management. The data thus generated can also be exploited to make better-informed decisions.
Another segment in the food and beverage industry that witnessed widespread adoption of automation was receiving orders. Faced with a shortage of a skilled workforce, quick-service restaurants were finding it challenging to provide customers with fast and quality service. Therefore, businesses started exploiting technologies such as the use of QR scanners to place orders and robots as waiters to reduce repetitive and mundane tasks. This enabled companies to decrease downtime, increase asset utilization, and improve overall effectiveness of the manpower.
SaaS platforms minimize waste and losses:
The use of SaaS platforms can also minimize waste and losses while ensuring traceability and offering real-time notification. For instance, SaaS-based platforms offer a single dashboard for stock management, production planning, and ordering. These platforms also aid in digitizing storage and transportation solutions, thus reducing the overall carbon footprint of the company.
The use of SaaS in supply chain tracking solutions also aids players in the food and beverages industry to reduce wastage, thereby minimizing losses. For instance, in case of shortages or delay in inventory using SaaS platforms, the players can either redirect the inventory supply from a different location or ensure the refrigeration system is functioning at its optimum.
Impact of the revolution in the food and beverage procurement business and process
Streamline operations and improve efficiency:
Technology revolution in food and beverage procurement is expected to reduce risk along the supply chain. It is also expected to transform the way food procurement companies operate and the overall consumer experience. One of the key impacts is increased efficiency and productivity.
Technology plays a key role in streamlining operations and improving efficiency in procurement in food services as it can reduce manual labor and automate repetitive tasks. Furthermore, the adoption of supply chain management systems and advanced analytics enables businesses to track their procurement in real time, thereby optimizing storage and distribution.
COVID-19 and geopolitical uncertainties have laid emphasis on end-to-end supply chain visibility and local sourcing. Customers, nowadays, insist on transparency in terms of knowing the origin of the ingredients, apart from how they were sourced, produced, and processed. Offering such transparency would foster trust and enable consumers to make informed decisions. Customers are also demanding the use of embedded AI capabilities that can provide real-time intelligence, actionable insights, and recommendations that reduce disruption time.
Recent events such as the Russia-Ukraine war and the COVID-19 pandemic have exposed the fragility and thin margins on which the F&B industry has been operating. Lean inventory, just-in-time procurement of ingredients, and short-term contracts have caused major setbacks to the businesses, especially in this industry. Therefore, we estimate that an agile procurement strategy will help reduce risks.
Why Choose SpendEdge?
Pricing and cost analysis:
We offer pricing and cost analysis based on market trends, competition, and pricing structures. F&B companies can use this data to negotiate better with suppliers, identify cost-saving opportunities, and ensure competitive pricing for their products. We offer pricing and cost analysis based on market trends, competition, and pricing structures. F&B companies can use this data to negotiate better with suppliers, identify cost-saving opportunities, and ensure competitive pricing for their products. By evaluating the pricing analysis, companies can identify supply channels that are more profitable and likely to attract long- and short-term investments.
Compliance with food safety regulations is critical in food and beverage procurement, and we can help businesses to be up to date with the latest requirements and meet the necessary quality and safety standards. This can reduce regulatory breaches and legal risks. We also evaluate supplier operations to ensure their compliance with regulatory requirements. This helps businesses mitigate risks of non-compliance due to suppliers’ actions or practices.
Success stories: SpendEdge helped F&B client boost profit margin with market intelligence and saves procurement costs.
A leading F&B company approached Infiniti Research to understand the cost structure for synthetic strawberry flavoring. The company wanted us to develop a cost model after analyzing the current manufacturing technologies/processes and capital investments. It also wanted us to create a cost components’ list containing both direct and indirect cost categories.
We started our research by selecting an off-the-shelf formula based on one of 1,200 widely used commercially available applications of Givaudan, IFF, Firmenich, and Symrise. Special attention was given to select a flavor chemistry that closely resembles Strawberry 1 from IFF and Strawberry Pure from Givaudan.
Our team of experts also spent a considerable amount of time to understand and analyze raw materials/ingredients, solvents and liquid fillers needed for the specific formulas to produce 2 MT of the final flavoring product. The proportion of each raw material used was analyzed, and bulk (1,000 kg) prices for each of them in the Netherlands were collated.
We also identified specific equipment needed at each step of the production process, their costs based on the equipment’s useful life and maintenance and CIP costs. To understand equipment costs, we approached manufacturers such as GEA. Labor costs were calculated based on company-specific hourly internal billing rates of general chemists, flavor chemists, technicians, and QC analysts. We derived profit margins from company financial reports and validated the same during our primary interactions with industry experts.
Later we assessed the data based on weightages assigned to each cost component and offered a robust cost model that was cross-checked using data model validation and scenario analysis. We calculated the final prices for per kilogram of flavor. We also offered cost breaks for process steps.
Worried about staying up to date with the regulatory requirements? We specialize in monitoring and analyzing regulatory updates. Our initiatives can help you to proactively adjust processes and practices to remain compliant. Contact our experts now!
What are the methods of food procurement?
Direct sourcing from farmers, engaging with distributors and wholesalers, and utilizing food service management companies are some of the methods of food procurement.
How important is purchasing in F&B?
Purchasing is vital as it directly impacts the quality, availability, and cost of ingredients, which in turn, impacts the success and profitability of F&B businesses.
What are the solution offerings for the F&B industry?
Supply chain management systems, inventory and procurement software, food safety and traceability solutions are some of the offerings that help F&B businesses to improve efficiency, reduce costs, ensure compliance, and enhance customer satisfaction.
Associate Vice President, Sourcing and Procurement Intelligence
George is a procurement specialist at Infiniti Research and provides advisory services to clients across the pharmaceutical, CPG & FMCG, energy, and automotive sectors. He specializes in the procurement areas of industry benchmarking, cost modeling, rate card benchmarking, negotiation advisory, and supplier intelligence.