The challenges facing the food and beverage industry have never been more difficult. Competition is insane, and prices are down. According to the accounting firm, RSM, “Food and beverage companies operate on some of the thinnest margins of any business sector.”
Meanwhile, food and beverage manufacturers are expected to meet new consumer demands for fresher products sourced responsibly and sustainably. Passing these additional costs onto the consumer is often a non-starter. That’s why it’s vital to take a broad view of forces that can help improve overall profitability.
Transportation is a major one of those forces.
Getting products from where they are manufactured to the places consumers will buy them is a challenge for every manufacturer. Still, the difficulty level is set to eleven for food and beverage companies for several reasons unique to these products.
Even though transportation is already one of the highest costs associated with supply chain management, forces are causing those costs to rise. Fuel is becoming more expensive. Federal regulation over driver hours is increasing. The shortage of skilled drivers is forcing higher wages. And the increase in demand for fresh and frozen foods is driving the need for more frequent deliveries.
MADBs and Chargebacks
Must Arrive by Dates (MABDs) are how retailers force manufacturers of food and beverage products to meet strict delivery dates. If shipments are late, fees add up quickly. Walmart’s On Time and In Full (OTIF) program, for example, charges suppliers 3% of the cost of goods sold if they don’t hit the mark. In addition to MABDs, retailers set other requirements for orders, including appointment scheduling and confirmation rules, operating hours, and preferred carriers.
Refrigerated Shipping Requirements
Many food and beverage products are subject to perishability or freeze-ability and require temperature-controlled transportation. Demand for refrigerated equipment has increased astronomically with the consumer preference for fresh and less processed products. Unusual weather patterns caused by climate change are making it more difficult than ever to forecast the need for temperature-controlled equipment.
So, what can food and beverage companies do to overcome these challenging issues? Fortunately, modern advanced analytics technology can help shippers make better decisions, cut costs, and reduce risks, all while meeting their customers’ strict standards.
Using Predictive Analytics to Select the Right Equipment
If temperature-controlled equipment is used when it is not needed, profits slip out of the door. On the other hand, if it isn’t used when it is needed, loads can be lost to spoilage. Traditionally, food and beverage companies have used lane calendars to choose the best equipment option during the hot and cold months. But more volatile weather is increasing the weeks of uncertainty, especially during the transition from fall to winter and winter to spring.
That’s where predictive analytics technology comes in. The best solutions can model the temperature every 10 miles for an entire lane for the next two weeks. It then simulates each planned shipment on the scheduled shipment date. Temperature data is then used to make an equipment recommendation. This takes the guesswork out of equipment selection and gives shippers less reason to overuse refrigeration as a way to mitigate risk. The suggestions are dynamic and can change right up until the time of shipping.
Meeting Delivery Windows with Shipment Simulation
In addition to making equipment recommendations, predictive analytics solutions can help food and beverage companies meet delivery windows while keeping costs down by analyzing the alternatives. They simulate every combination of shipping choice so users can see the impact of changing carriers, picking up early, picking up later in the day, or changing mode. The optimal shipment based on costs, on-time arrival, and even climate impact is suggested. This type of modeling is even more essential when poor travel conditions are forecast.
With the right equipment and the most optimal shipping plan, food and beverage companies can cut costs, satisfy clients, reduce risk, and ensure that store shelves stay full. In other words, predictive intelligence technology is one way to protect the bottom line.