The Top 5 Food and Beverage Industry Problems CEOs Are Facing
While there are certainly more, there are five food and beverage industry problems CEOs are facing that should be at the top of the list. Prioritizing these issues is the key to correcting them, then moving on to handle smaller issues.
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1. The Food Safety Modernization Act
This issue tops the list because it is the most important issue in the industry. According to the FDA website, the act was passed in January of 2011, and it has been slow to take effect. The idea behind the bill is to avoid contamination of food in a proactive manner, not retroactive. However, the bill has a hard time in the industry due to necessary extra staffing and technology at the processing and distribution levels.
The bill, in part, hoped to increase the food tracing process. This includes an increased paper trail for all food moving from farm to market. The process aims to assist in any cases of foodborne illnesses, but it indirectly created higher costs for food industries.
Luckily, the technology for tracking food is already available. Enterprise resource planning (ERP), warehouse management systems (WMS) and electronic proof of delivery systems are already in use by some food processing companies. However, those who are not up to date on technology had to adjust.
Recognizing these issues, the FDA announced an increase in funds to assist businesses in March of 2016, with $19 million available to states who apply for the funds. The funds will be devoted to farmer education and food production updates to coincide with the bill.
2. Waste Reduction
Reducing waste means more than simply recycling or using every part of a food source. Before technology was commonly used, paper trails were the main source of product tracking, which led to mistakes, mishandling and lost product. Today’s technological world has greatly reduced waste, however, the paper trails are as new as 2008. The waste, loss of product, incorrect inventory and record keeping is still being cleaned up. Additionally, farmers or companies who are not up to date with tracking technology are continuing to generate waste within the industry.
Paper and pen errors are still significant in the industry. Updating every part of the food production process with advanced technology will help reduce waste caused by paper record keeping. This is part of the hope for the Food Safety Modernization Act, which will help every part of the process update to electronic records.
3. Need to Increase Bottom Line
Let’s face it – the bottom line in food production is to generate money for every company involved, from the farmer to the grocery store. Increasing efficiency in the supply chain is the answer to increasing the bottom line. Daily, CEOs must address ways to increase income, and many CEOs have found the answer in tracking with advanced business software and technology.
Tracking food from its source helps keep inventory counts correct. Knowing exactly how many apples come from the tree, for example, helps businesses know how many are going to market. Placing a quantitative amount on each apple helps project how much money will come from each bushel. Through tracking technology, the CEO can then understand how much money will be returned through the sale of each apple.
Additionally, technology helps businesses reduce invoice disputes and no-pay invoices, which hurts the bottom line. When these invoices are reduced or eliminated completely, the bottom line improves. In fact, according to Georgia Brown, businesses witness a 70% decrease in no-pay invoices with the use of tracking technology.
4. Increasing Green Business Practices
No matter what side of the global warming fence a business sits, operating greener facilities is on the priority list of every CEO. Recent years have found consumers demanding product from environmentally-friendly companies, and companies have responded. The complete food chain, from farmers to grocery stores, have attempted to “go green” by utilizing resources like solar panels or composting leftover food.
While the Food Safety Modernization Act is demanding electronic trails, consumers are also driving companies to follow the ‘greener’ practice of electronic trails. Many businesses are turning to technology to comply with these efforts, eliminating the need for paper, thus eliminating waste.
Some of the bigger issues, however, include the costs of going completely green. For example, many businesses cannot afford to switch a fleet of trucks to energy efficient vehicles. Many businesses are instead searching for simple solutions to display their dedication to being an environmentally cleaner business. Many restaurants and grocery stores are pairing with local gardens or farms in composting contracts, and most of the food chain industry is reducing paper trails publicly.
CEOs are beginning to work with advertising teams to highlight the smaller efforts, and many companies are beginning to take small steps toward working under a greener company. Some are slowly replacing each truck rather than the full fleet; others are using solar panels for parts of the business, such as the HVAC system. Most are switching to technology-based food tracking over paper, which is the quickest and most impactful change a company can make.
5. The Competitive Advantage
This issue bottoms the list, because it is the most evident issue facing CEOs across all companies. However, specific competitive issues in the food industry include reliability of all parts, capacity to distribute and customer service. Many companies believe that expansion is the best way to a competitive advantage, but this is not completely true.
Focusing on the specific issues, and working to increase those parts, increases the competitive advantage along with expansion. Businesses who cannot expand can gain a competitive edge by increasing customer service, distribution or reliability of their products.
Again, the Food Safety Modernization Act strives to increase all three parts of gaining a competitive edge, if it maintains its funding and continues to educate all parts of the food service industry.
Aplicor’s all-in-one embedded system gives food and beverage distribution companies full visibility into their processes, inventory, and data. To learn more about how to overcome these issues and increase your efficiency, contact us.